Practice Exercise (Rational Consumer)
Jacob is a Lego maniac, but he also likes Super Soaker squirt guns. The following
table shows Jacob’s total utility and marginal utility from Legos and squirt guns
measured in utils.
Quantity
of Legos
TU
MU
MU/P
Quantity
of Squirt
Guns
TU
MU
MU/P
0
0
0
0
1
20
1
50
2
37
2
75
3
50
3
90
4
60
4
100
5
65
5
102
a. Suppose the price of Legos is $5 per set and the price of a squirt gun is $8 per
gun. Fill in the table. Compute the marginal-utility-to-price ratios for Legos and
squirt guns and enter these values in the table.
b. How many sets of Legos and how many squirt guns will Jacob purchase if he
has $26 to spend? Carefully explain how you arrived at your answer.
c. Now suppose the price of Legos falls to $2.50 per set while the price of squirt
guns stays the same. How many sets of Legos and how many squirt guns will he