Table 8.2

Table 8.2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.
-Refer to Table 8.2.Holding prices constant, when Keira's income changed from $18 to $23, what happens to her total utility and to the marginal utilities of the last cup of soup and the last sandwich purchased?

Question

Table 8.2
  
Table 8.2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.
-Refer to Table 8.2.Holding prices constant, when Keira's income changed from $18 to $23, what happens to her total utility and to the marginal utilities of the last cup of soup and the last sandwich purchased?

Quizplus · Accepted Answer

When Keira's income increases, she can afford to consume more goods, which increases her total utility. However, as she consumes more of each good, the marginal utility of the last unit of each good typically decreases due to the law of diminishing marginal utility.

Table 8.2 Table 8.2 Above Shows Keira's Utility from Soup and Sandwiches