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Cloe enjoys eating burritos. Her total benefit for different amounts of burritos are set out in the table below.Quantity Total Benefit1 $202 $393 $574 $745 $906 $1057 $1198 $1329 $14410 $155 If the price is $17, how many burritos Cloe will buy if she is a utility maximiser?

Question

Cloe enjoys eating burritos. Her total benefit for different amounts of burritos are set out in the table below.Quantity Total Benefit1 202202 393 574574 745 906906 1057 11981198 1329 1441014410 155 If the price is $17, how many burritos Cloe will buy if she is a utility maximiser?

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Solution

To determine how many burritos Cloe will buy, we need to calculate her marginal benefit for each additional burrito and compare it to the price. The marginal benefit is the additional benefit she receives from consuming one more burrito.

Step 1: Calculate the Marginal Benefit The marginal benefit is the difference in total benefit from consuming one more unit. Here's how to calculate it:

  • From 1 to 2 burritos: 3939 - 20 = $19
  • From 2 to 3 burritos: 5757 - 39 = $18
  • From 3 to 4 burritos: 7474 - 57 = $17
  • From 4 to 5 burritos: 9090 - 74 = $16
  • From 5 to 6 burritos: 105105 - 90 = $15
  • From 6 to 7 burritos: 119119 - 105 = $14
  • From 7 to 8 burritos: 132132 - 119 = $13
  • From 8 to 9 burritos: 144144 - 132 = $12
  • From 9 to 10 burritos: 155155 - 144 = $11

Step 2: Compare the Marginal Benefit to the Price Cloe will buy burritos as long as the marginal benefit is greater than or equal to the price. The price of a burrito is 17.Lookingatthemarginalbenefitswecalculated,Cloewillbuyburritosuntilthemarginalbenefitislessthan17. Looking at the marginal benefits we calculated, Cloe will buy burritos until the marginal benefit is less than 17.

So, Cloe will buy 3 burritos, because the marginal benefit of the fourth burrito ($17) is equal to the price. As a utility maximizer, she will buy burritos as long as the marginal benefit is greater than or equal to the price.

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