AP Microeconomics
Optimal Consumption Problem
Using the data below, answer the questions that follow this chart showing the marginal utility
for goods A and B.
Quantity
1
2
3
4
5
6
7
8
9
10
11
12
Good A $ 4
Marginal Utility
24
16
12
8
4
2
0
0
0
0
0
0
Good B $1
Marginal Utility
12
8
6
4
3
2
1
1
1
1
1
1
If a consumer has $12 to spend, and the Price of Good A is $4 and the Price of Good B is $1?
a. Illustrate the consumer’s budget line and label each consumption bundle A-D:
b. Complete the following table
Consumption
Bundle
A
B
C
D
Quantity of
Good A
Utility of
Good A
Quantity of
Good B
Utility of
Good B
Total Utility
c. Based on the information above, what is the consumer’s optimal consumption
bundle?
d. What is the total utility of the chosen combination?
e. State the optimal consumption rule:
f. How many of Good A and how many of Good B will the consumer buy based on this
rule?
g. Explain how you determined the number purchased of A and B.