Concept of utility Maximization - Principles of Microeconomics - Economics Assessment Answer

Economics Assessment Task

Question 1

The table below shows the total utility schedules for Product X and Product Y for a hypothetical consumer. The price of Product X is R4 and the price of Product Y is R2. The income of the consumer is R20.

1.1 Illustrate the consumer’s budget line and clearly indicate the coordinate points for both products. (4)

1.2 Calculate the following:

1.2.1 Marginal utility of the fourth Product X (2)

1.2.2 Weighted Marginal Utility when purchasing five of Product Y. (2)

1.3 Using the concept of utility maximisation, explain to the consumer whether you support a decision to buy four items of Product X and two items of Product Y.

(4) 1.4 How many units of Product X and Product Y should the consumer order to maximise utility? Show calculations (4)

1.5 What is the total utility for the consumer based on your answer in 1.4?

Question 2

 A firm is analysing the impact of a price increase on frozen vegetables. The price was increased from R35 to R38 per kilogramme, resulting in a decline in quantity demanded, from 1 400 to 1 350 kilogrammes per day.

2.1 What is the price elasticity of demand for frozen vegetables in this price range, based on the midpoint formula? 

2.2 Given that the price increase resulted in reduced sales, using the elasticity coefficient and the revenue test, explain whether you think the decision to increase the price was sound. (4) Read the following paragraph to answer the questions that follow:

2.3 A firm sold 2 000 product units per day in 2017. The average monthly household income in an economy increased by 25% in 2018. How many products did the company sell in 2018 if the income elasticity for the product was calculated at 0.4?

Milpark Principles of Microeconomics (PMIC02-5) Assignment 23 August 2019 Page 4 of 5

2.4 A coffee shop is evaluating the effect of cutting the price of premium coffee from R40 to R38 a cup. Current sales are 3 800 cups per year. The firm believes the price increase will result in selling 200 additional cups. It also expects increased sales of chocolate cake, as a result of the coffee promotion - from 200 to 220 cakes per year.

2.4.1 What is the arc cross elasticity of demand for cakes with respect to coffee? (4) 2.4.2 Is the firm’s expectation of selling more chocolate cakes justified? Explain.

This Economics Assessment has been solved by our Economics experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.