Juan spends all of his income on baseball cards and candy. At his current consumption bundle, the marginal utility of baseball c
1 answer:
Answer:
Juan should consume more baseball cards and less candy.
Explanation:
Juan spends all of his income on baseball cards and candy.
The marginal utility of baseball cards is 20 and the marginal utility of candy is 10.
The price of baseball cards is $10 and the price of candy is $2.
The total utility will be maximized if the ratio of marginal utility and price of a good is equal for both the goods.
The ratio for baseball cards
=
=
= 2
The ratio for candy
=
=
= 5
Since, the ratio is greater for candy and lesser for baseball cards, Juan should consume more baseball cards and less candy.
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Answer:
Ans. He must save during each of the following 10 years, at the end of each year $32,452.
Explanation:
Hi, in order to find the amount of money that he should have in ten years so he can receive an annual payment of $65,156 for 25 more years (24 payments), we need to bring to present value all 24 payments to year 10. Let me show you the formula.
Where:
A= $65,156
n= 24
r= 0.08
Therefore the present value in year 10 is:
So that is our present value in year 10, or to put it in other words, our future value (if we look at it from year 0). Now we need to find the annuity (amount to save) that with account for $686,012, plus that $100,000 that he already has saved.
Every should look like this.
And we solve this equation for "A".
Best of luck.