Question

Derek has $1 to spend at the grocery store. an apple, an orange, and a banana cost $0.50 each. if derek’s mua/pa (ratio of marginal utility to price) of an apple is 45, muo/po of an orange is 38, and mub/pb of a banana is 52, he will purchase a(n) _____ first and a(n) _____ second.

Answer 1

Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service.It indicates the satisfaction derived from the last dollar spent on a good. The equation for the marginal utility-price ratio looks like is:
marginal utility of a generic good / price of a generic good
mua/pa=45 (apple)
So, the marginal utility of an apple is: price of the apple * marginal utility price ratio = 0.5*45=22,5
mua/po=30 (orange)
For the orange: 0.5*30=15
mua/pb=52 (banana)
For the banana: 0.5*52=26
So, Derek will purchase an banan first and an apple second.