The demand for a necessity whose cost is a small portion of one’s total income is


The demand for a necessity whose cost is a small portion of ones total income is: A. perfectly price inelastic. B. perfectly price elastic. C. relatively price inelastic D. relatively price elastic. 20. Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K Units Units of K MU 32 2 28 3 2 4 20 5 12 6 10 ofJ M 1 56 2 48 3 32 4 24 5 20 6 16 7 12 78 Refer to the data. What level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $52 and the prices of J and K are $8 and S4 respectively? A. 156 utils B. 124 utils C. 276 utils D. 36 utils 21. Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. Units Units 1 56 1 2 48 3 32 4 24 5 20 32 2 28 3 24 4 20 5 12 6 10 7 12 78 6 1 Refer to the data. If the consumers money income were cut from $52 to $28, and the prices of J and K remain $8 and $4 respectively, she would maximize her satisfaction by purchasing: A. 3 units of J and 3 units of K. B. 1 unit of J and 3 units of K. C. 4 units of J and 1 unit of K D. 2 units of J and 3 units of K.
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Answer

Ans) 19.
c. relatively price inelastic
The demand is inelastic because it is a necessity.
20.
a. 156 utils
104+52=156
21.
D. 2 units of J and 3 units of K
8x+4y=52
MUx/Px=MUy/Py is true for bundles
x y U
1 2 7 1(8)+2(4)=8+8=16
2 3 6 2(8)+3(4)=16+12=28
4 5 3 4(8)+5(4)=24+20=44
5 6 2.5 5(8)+6(4)=40+24=64
6 7 2 6(8)+7(4)=48+28=76
The income is exhaustible only when the bundle (2,3) is used.
22.
B. are consuming X and Y in optimal amounts
The consumers should consume where Mux/Px=MUy/Py
Here 40/8=20/4 Table :

J Muj TU=Muj+Muj-1 Muj/Pj K Muk TU Muk/Pk
1 56 56 7 1 32 32 8
2 48 104 6 2 28 60 7
3 32 80 4 3 24 52 6
4 24 56 3 4 20 44 5
5 20 44 2.5 5 12 32 3
6 16 36 2 6 10 22 2.5
7 12 28 1.5 7 8 18 2

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