Consumer Choice and Utility Analysis

The video tutorial discusses Martha's budget of $20, which she spends on goods X and Y. It explains how to calculate the marginal benefit of the fifth unit of good X and the total consumer surplus when consuming five units of X. The tutorial uses marginal analysis to show why Martha's current consumption of four units of X and two units of Y is not optimal. It then determines the optimal combination of goods X and Y for Martha. Finally, it examines how changes in the price of good Y and Martha's income affect her optimal consumption choices.

What is the price per unit of good X?

• $8

• $6

• $2

• $4

How much is the marginal benefit of the fifth unit of good X?

• $1.50

• $2.00

• $1.00

• $0.50

What is the consumer surplus when Martha consumes five units of X?

• $20

• $15

• $21

• $25

Why is Martha's current consumption of four units of X and two units of Y not optimal?

• She has not consumed any units of Y.

• The marginal benefit per dollar of X is higher than Y for the third unit.

• The marginal benefit per dollar of Y is higher than X for the third unit.

• She spends more than her budget.

What is the marginal benefit per dollar for the first unit of good Y?

• 3

• 4

• 5

• 2

What is the marginal benefit per dollar for the second unit of good X?

• 1

• 2

• 3

• 4

What is Martha's optimal combination of goods X and Y?

• 5 X's and 1 Y

• 4 X's and 2 Y's

• 3 X's and 4 Y's

• 2 X's and 3 Y's

If the price of good Y doubles, what happens to the quantity of Y Martha buys?

• It increases.

• It stays the same.

• It decreases.

• It becomes zero.

What happens to Martha's consumption if her income falls to ten dollars with no price changes?

• She buys more of both goods.

• She buys less of both goods.

• She buys more of good Y only.

• She buys more of good X only.

If Martha's income and the prices of both goods double, what happens to her consumption?

• She buys only good X.

• She buys less of both goods.

• Her consumption stays the same.

• She buys more of both goods.