Microeconomics

Ch5
Consumer Choices

Utility: The satisfaction that people receive from consuming goods and services .
Marginal utility: The change in total utility
Total utility : The sum of marginal utility

Law of diminishing marginal utility : when people consuming additional units of

goods or services the marginal utility will be decrease .

*The terms or conditions for maximizing total utility

1- the marginal utility per dollar or riyal must be equal for the two goods
2-the amount available for spending (income) must equal the total amount
spending on the goods

‫قواعد حل الجدول‬
1- At quantity 1 …. TU = MU
2- if we need to calculate TU we must go to the MU column and add the all
number
3- if we need to calculate MU must go to the TU column and subtract

DR/ Hatem El-Waseif

31003012
 Microeconomics
Ch5
Consumer Choices
Q
The Cola = 2 $ per unit
The sandwich = 5 $ per unit
Maha own’s = 23 $
Quantity Total Marginal Marginal Quantity Total Marginal Marginal
of Cola utility Utility utility of utility Utility utility
(TU) (MU) per sandwich (TU) (MU) per
dollar dollar
MU/P MU/P
1 20 20 20/2 = 10 1 40 40 40/5=8
2 40 20 10 2 70 30 6
3 56 16 8 3 95 25 5
4 66 10 5 4 110 15 3
5 74 8 4 5 120 10 2
6 80 6 3 6 125 5 1

Required :-
1-Complete the table above
2-How many units must maha purchasing for maximizing her total utility and what
is total utility
No of Cola No of Sandwich Cost (total
spending)
8 3 1 6 + 5 = 11 $
5 4 3 8 + 15 = 23
3 6 4 12 + 20 = 32

Answer / Maha must purchase 4 Cola and 3 Sandwich

Total utility = 66 + 95 = 161

DR/ Hatem El-Waseif

31003012
 Microeconomics
Ch5
Consumer Choices

3-Suppose the maha’s income increase to 32 $ How many units must maha
purchasing for maximizing her total utility and what is the total utility
Answer/ Maha must purchase 6 Cola and 4 sandwich
Total utility = 80 + 110 = 190

Marginal utility per dollar or Riyal = marginal utility / P

Notes:-
 when the total utility increase , the marginal utility decrease (Vice versa)
 when the total utility decrease , the marginal utility be negative
 When the marginal utility = Zero , this meaning that total utility at
maximum

Q
Covid – 19 effects on so many industries explain by diagram
P S2 S1

10
6
D

Q
4 8
The equilibrium price increase and equilibrium quantity decrease

DR/ Hatem El-Waseif

31003012