CHAPTER 4 EXERCISES

Name: Cedrick Clarence Tantay Score:

Year/Course/Section: BSE 1-A Schedule: 10:00-11:30 (M to TH)

Test I. Identification

Direction: Identify the following statements. Write your answer on the space provided for.

UTILS 1. The unit of satisfaction.

UTILITY 2. It is the level of satisfaction.

Marginal Utility 3. It is additional or extra utils the individual gains when he or she
consumes additional 1 unit of commodity.

Indifference Curve 4. It is a tool which shows the different combination goods and services
that an individual consumes that yields the same level of satisfaction of utility.

Budget Line 5. It is the line that represents combination of goods that can be
purchased by your income.

II. During month-end, Homer loves to drink beer and eat crackers as the side dish. The units of beer are
express in glass while crackers are express in packs. The price of crackers is Php1.50 per pack while the
price of beer is Php3.00 per glass. His budget every month for the two commodities is Php18.00.
Packs of Crackers TU MU MU/P
0 0 - -
1 10 10 6.66
2 18 8 5.33
3 24 6 4
4 28 4 2.66
5 31 3 2
6 33 2 1.33
Glass of Beer TU MU MU/P
0 0 - -
2 18 18 6
4 33 15 5
 6 45 12 4
8 54 9 3
10 60 6 2
0 0 - -

1. Compute the MU and MU/P for each point for both commodities.

2. How many glass of beer and packs of crackers should Homer consume to attain the consumer
equilibrium? Explain your answer.