Preferences consistentwith diminishing marginal utility

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Reference no: EM1322767

Q. For this problem, assume that Joe has $80 to spend on books also movies each month also that both goods must be purchased whole (no fractional units). Movies costs $8 also books costs $20 each. Joe's preferences for movies also books are summarized by the subsequent information.

a. Are these preferences consistent with the lw of diminishing marginal utility? Explain briefly.

b. Given the budget of $80, Illustrate what quantity of books also Illustrate what quantity of movies will maximize Joe's level of satisfaction? Explain briefly.

c. Draw the budget constraint (with books on the horizon axis)also identify the optimal combination of books also movies as point A.

d. Now assume the price of books fall to $10. Which of the columns in the table must be recomputed? Do the required calculations.

Reference no: EM1322767

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