Consumer Choice, Deriving Demand and Utility Maximisation (Exam Example)

In this video I try and explain how to derive demand functions using efficient bundles of 3 goods. Here we use utility maximisation conditions in order to ensure the bundles that we find are indeed the ones that do maximise the consumers total utility.

Daniel allocates his budget of $24 per week among three goods. Use the following table of the marginal utilities for Good A, Good B, and Good C to answer the questions below:

(a) If the price of A is $2, the price of B is $3, and the price of C is $1, how much of each will Daniel purchase in equilibrium? [6 points]

(b) If the price of A rises to $4 while the other prices and Daniel's budget remain unchanged, how much of each will he purchase in equilibrium? [6 points]

(c) Using the information from parts (a) and (b), draw the demand curve for good A. Be sure to indicate the price and quantity for each point on the curve labeled. [8 points]

I hope it helps :)

[HaroldWalden]

Just a short example of how to find consumption bundles that maximise a consumers total utility.
I hope it helps :)