Marginal utility, Price Elasticity of Demand

In this assignment, you will focus on marginal utility, Price Elasticity of Demand, and understanding the
difference between Price Elasticity of Demand and Income Elasticity of Demand.
We all subconsciously assign “scores” to what we are considering to purchase, based on our expected level of
“satisfaction” (Marginal Utility) with that purchase. When making simultaneous pairs of purchases, again we
subconsciously compare the amount of “satisfaction” (Marginal Utility) that we will receive from the pair of
purchases. To decide on the “ideal” combination of these two purchases, we expect that the last dollar we
spend on each of the items will give us the “same” satisfaction per dollar (Marginal Utility per dollar). Further,
we know that the MORE of an item that we get, the next one we get will give us LESS “satisfaction” (Marginal
Utility) than the last one gave us (the Law of Diminishing Marginal Utility). Using what you have learned about
Marginal Utility and Marginal Utility per dollar, answer the following questions.