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José clearly prefers point Q to point P. Now repeat this step-by-step process of decision making with marginal utilities. José thinks about giving up the third T-shirt and surrendering a marginal utility of 20, in exchange for purchasing two more movies that promise a combined marginal utility of 27. José prefers point R to point Q. What if José thinks about going beyond R to point S? Giving up the second T-shirt means a marginal utility loss of 21, and the marginal utility gain from the fifth and sixth movies would combine to make a marginal utility gain of 23, so José prefers point S to R.

However, if José seeks to go beyond point S to point T, he finds that the loss of marginal utility from giving up the first T-shirt is 22, while the marginal utility gain from the last two movies is only a total of 19. If José were to choose point T, his utility would fall to 100. Through these stages of thinking about marginal tradeoffs, José again concludes that S, with one T-shirt and six movies, is the choice that will provide him with the highest level of total utility. This step-by-step approach will reach the same conclusion regardless of José’s starting point.

Another way to look at this is by focusing on satisfaction per dollar. Marginal utility per dollar is the amount of additional utility José receives given the price of the product. For José’s T-shirts and movies, the marginal utility per dollar is shown in [link] .

marginal utility per dollar = marginal utility price

José’s first purchase will be a movie. Why? Because it gives him the highest marginal utility per dollar and it is affordable. José will continue to purchase the good which gives him the highest marginal utility per dollar until he exhausts the budget. José will keep purchasing movies because they give him a greater “bang or the buck” until the sixth movie is equivalent to a T-shirt purchase. José can afford to purchase that T-shirt. So José will choose to purchase six movies and one T-shirt.

Marginal utility per dollar
Quantity of T-Shirts Total Utility Marginal Utility Marginal Utility per Dollar Quantity of Movies Total Utility Marginal Utility Marginal Utility per Dollar
1 22 22   22/$14=1.6 1 16 16 16/$7=2.3
2 43 21   21/$14=1.5 2 31 15 15/$7=2.14
3 63 20   20/$14=1.4 3 45 14 14/$7=2
4 81 18   18/$14=1.3 4 58 13 13/$7=1.9
5 97 16   16/$14=1.1 5 70 12 12/$7=1.7
6 111 14   14/$14=1 6 81 11 11/$7=1.6
7 123 12   12/$14=1.2 7 91 10 10/$7=1.4

A rule for maximizing utility

This process of decision making suggests a rule to follow when maximizing utility . Since the price of T-shirts is twice as high as the price of movies, to maximize utility the last T-shirt chosen needs to provide exactly twice the marginal utility (MU) of the last movie. If the last T-shirt provides less than twice the marginal utility of the last movie, then the T-shirt is providing less “bang for the buck” (i.e., marginal utility per dollar spent) than if the same money were spent on movies. If this is so, José should trade the T-shirt for more movies to increase his total utility. Marginal utility per dollar measures the additional utility that José will enjoy given what he has to pay for the good.

Questions & Answers

how does Neisseria cause meningitis
Nyibol Reply
what is microbiologist
Muhammad Reply
what is errata
Muhammad
is the branch of biology that deals with the study of microorganisms.
Ntefuni Reply
What is microbiology
Mercy Reply
studies of microbes
Louisiaste
when we takee the specimen which lumbar,spin,
Ziyad Reply
How bacteria create energy to survive?
Muhamad Reply
Bacteria doesn't produce energy they are dependent upon their substrate in case of lack of nutrients they are able to make spores which helps them to sustain in harsh environments
_Adnan
But not all bacteria make spores, l mean Eukaryotic cells have Mitochondria which acts as powerhouse for them, since bacteria don't have it, what is the substitution for it?
Muhamad
they make spores
Louisiaste
what is sporadic nd endemic, epidemic
Aminu Reply
the significance of food webs for disease transmission
Abreham
food webs brings about an infection as an individual depends on number of diseased foods or carriers dully.
Mark
explain assimilatory nitrate reduction
Esinniobiwa Reply
Assimilatory nitrate reduction is a process that occurs in some microorganisms, such as bacteria and archaea, in which nitrate (NO3-) is reduced to nitrite (NO2-), and then further reduced to ammonia (NH3).
Elkana
This process is called assimilatory nitrate reduction because the nitrogen that is produced is incorporated in the cells of microorganisms where it can be used in the synthesis of amino acids and other nitrogen products
Elkana
Examples of thermophilic organisms
Shu Reply
Give Examples of thermophilic organisms
Shu
advantages of normal Flora to the host
Micheal Reply
Prevent foreign microbes to the host
Abubakar
they provide healthier benefits to their hosts
ayesha
They are friends to host only when Host immune system is strong and become enemies when the host immune system is weakened . very bad relationship!
Mark
what is cell
faisal Reply
cell is the smallest unit of life
Fauziya
cell is the smallest unit of life
Akanni
ok
Innocent
cell is the structural and functional unit of life
Hasan
is the fundamental units of Life
Musa
what are emergency diseases
Micheal Reply
There are nothing like emergency disease but there are some common medical emergency which can occur simultaneously like Bleeding,heart attack,Breathing difficulties,severe pain heart stock.Hope you will get my point .Have a nice day ❣️
_Adnan
define infection ,prevention and control
Innocent
I think infection prevention and control is the avoidance of all things we do that gives out break of infections and promotion of health practices that promote life
Lubega
Heyy Lubega hussein where are u from?
_Adnan
en français
Adama
which site have a normal flora
ESTHER Reply
Many sites of the body have it Skin Nasal cavity Oral cavity Gastro intestinal tract
Safaa
skin
Asiina
skin,Oral,Nasal,GIt
Sadik
How can Commensal can Bacteria change into pathogen?
Sadik
How can Commensal Bacteria change into pathogen?
Sadik
all
Tesfaye
by fussion
Asiina
what are the advantages of normal Flora to the host
Micheal
what are the ways of control and prevention of nosocomial infection in the hospital
Micheal
what is inflammation
Shelly Reply
part of a tissue or an organ being wounded or bruised.
Wilfred
what term is used to name and classify microorganisms?
Micheal Reply
Binomial nomenclature
adeolu
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Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
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