S. Klepper, Economics 73-100, Fall 2008

Quiz 2

Consider a consumer that purchases 30 units of food and 20 units of clothing. Let the price of food and the price of clothing each be $2 per unit. Suppose that the utility the consumer gets from each unit of food is independent of the number of units of clothing consumed, and vice versa. Furthermore, for simplicity assume that the consumer would get the same utility from a 31^st unit of food as the 30^th unit of food and the same utility from a 21^st unit of clothing as the 20^th unit of clothing.

Which of the following statements concerning this situation are correct? Mark true for a correct answer and false for an incorrect one and provide explanations for each of your answers.

_____1. Since the consumer buys more units of food than clothing, the consumer must get more total utility from the 30 units of food than the 20 units of clothing.

_____2. Since the consumer buys 50% more units of food than clothing, the consumer must get 50% more utility from the 30 units of food than the 20 units of clothing.

_____3. The consumer must get the same utility from the marginal unit of food consumed as the marginal unit of clothing consumed.

_____4. Since the consumer spends a greater total amount on food than clothing, the consumer must get more total utility from the 30 units of food than the 20 units of clothing.

_____5. If the consumer were given an additional $2 to spend, the consumer would be prefer an additional unit of clothing over an additional unit of food.