Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

74 CONSUMER DEMAND THEORY [CHAP. 4
Since MU x ¼ DTU x /DQ x , each value of MU x has been recorded midway between successive levels of consumption.
(For the same reason, the values of MU x in Table 4.6 should have been recorded between successive
values of the TU x ; however, this was not done so as not to complicate the table unduly.)
4.3 (a) Explain Table 4.6 if Q x refers to the number of candy bars consumed per day by a teenager. (b) What
does a utility function reflect?
(a) As the number of candy bars consumed per day increases, the total utility the teenager receives increases
(up to a point). However, each additional unit consumed yields less and less extra or marginal utility. When
the teenager increases consumption from 7 to 8 candy bars per day, the total utility is maximum and the
marginal utility is zero. This is the saturation point. This teenager will not consume additional candy
bars, even if they are free. Indeed, if given free more than 8 candy bars per day and the candy can not
be resold, this teenager incurs the disutility of disposing (i.e., getting rid of) them.
(b) A utility function refers to a particular individual and reflects the tastes of this individual. Different
individuals usually have different tastes and thus have different utility functions. Also, when the
tastes of an individual change, the utility function also changes (shifts).
4.4 From the TU y schedule in Table 4.7, (a) derive the MU y schedule, and (b) plot the TU y and the MU y
schedules and indicate the saturation point.
Table 4.7
Q y 0 1 2 3 4 5 6 7
TU y 0 4 14 20 24 26 26 24
(a) Table 4.8
Q y 0 1 2 3 4 5 6 7
TU y 0 4 14 20 24 26 26 24
MU y
.. 4 10 6 4 2 0 22
(b)
Fig. 4-11
It should be noted that in this case the MU y , curves rises first and then falls.