EWU Spring Quarter 2002 ECON 100 Section 01 General Education Economics

EWU – ECON 450 – Public Finance - Briand

Handout -- Review: Utility and Choice

Utility and Choice. Part I.

Gabrielle has to decide how to best allocate her $10 dollars budget. She can spend it on used CDs, gas, or discount movie theater tickets. Used CDs are $2 a piece, gas is $1 a gallon, and discount movie theater tickets go for $3 a piece.

CD (P=$2) / Gas (P=$1/gallon) / Movie (P=$3/ticket)
Units / MU / MU/P / Units / MU / MU/P / Units / MU / MU/P
1
2
3
4
5
6
7 / 200
98
50
10
0
-70
-200 / 100
49
25
5
0
-35
-100 / 1
2
3
4
5
6
7 / 200
150
50
30
0
-300
-700 / 200
150
50
30
0
-300
-700 / 1
2
3
4
5
6
7 / 150
90
60
30
9
0
-6 / 50
30
20
10
3
0
-2
Steps / Choices / Decision / Remaining Budget
1st purchase / 1st
1st
1st / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
2nd purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
3rd purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
4th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
5th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
6th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=

Utility and Choice. Part II.

The price of used CDs has decreased to $1 a piece. How should Gabrielle allocate her $10 budget now?

CD (P=$1) / Gas (P=$1/gallon) / Movie (P=$3/ticket)
Units / MU / MU/P / Units / MU / MU/P / Units / MU / MU/P
1
2
3
4
5
6
7 / 200
98
50
10
0
-70
-200 / …
…
…
…
…
…
… / 1
2
3
4
5
6
7 / 200
150
50
30
0
-300
-700 / 200
150
50
30
0
-300
-700 / 1
2
3
4
5
6
7 / 150
90
60
30
9
0
-6 / 50
30
20
10
3
0
-2
Steps / Choices / Decision / Remaining Budget
1st purchase / 1st
1st
1st / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
2nd purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
3rd purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
4th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
5th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
6th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
7th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=
8th purchase / CD
Gas
Movie / MU/P=
MU/P=
MU/P=