Assignment 2

1.

Soccer TU MU MU/P Fishing TU MU MU/P

1 28 28 4.67 1 150 150 5

2 46 18 3 2 270 120 4

3 62 16 2.67 3 360 90 3

4 74 12 2 4 420 60 2

5 80 6 1 5 450 30 1

6 84 4 0.67 6 470 20 0.67

7 86 2 0.33 7 480 10 0.33

2. These preferences are consistent with the law of diminishing marginal utility. This is because
the law of diminishing marginal utility depicts that the utility from additional units keeps
decreasing just like the soccer and fishing preferences keep decreasing.
3. Given a budget of $144, Mohammad will purchase 4 units for both soccer games and fishing
trips. This is because utility is maximized where MU/P for both goods are equal to one another.
4. The MU/P column must be recalculated as shown below;

Soccer TU MU MU/P

1 28 28 3.5

2 46 18 2.25

3 62 16 2

4 74 12 1.5
 5 80 6 0.75

6 84 4 0.5

7 86 2 0.25

5. Mohammad will purchase 3 units of soccer games and 45 units of fishing trips.
6.

TU for TU for
Units soccer Fishing

1 28 150

2 46 270

3 62 360

4 74 420

5 80 450

6 84 470

7 86 480
 Total Utility for Soccer and Fishing
600

500

400
TU Soccer
TU for fishing
300

200

100

0
1 2 3 4 5 6 7