Question 1 (b)(ii)
How many burgers to buy at ₹60 each, deciding at the margin
2 marks
- Time to write
- About 4 minutes
Question
Question 1 (b)(ii) · 2 marksThe total benefits you get from consuming different quantities of burger each week are given in the table below.
| Burgers (per week) | Total benefit (equivalent in ₹) | Marginal Benefit |
|---|---|---|
| 0 | 0 | X |
| 1 | 180 | |
| 2 | 300 | |
| 3 | 384 | |
| 4 | 444 | |
| 5 | 480 | |
| 6 | 504 |
- The price of a burger is ₹60. Apply the Principle of Optimization at the Margin to find how many burgers it is optimal to consume every week.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- findFormula first, then the working, then the answer with its unit (₹, %, units).
What the paper leaves open
As printed, the price used in this part equals the marginal benefit of one of the burgers, so the consumer is indifferent about buying that burger; this copy keeps that.
Write it in this order
- 1 The marginal rule, benefit of one more unit against its cost ½ mark 1 min
- 2 Each burger compared with the price 1 mark 2 min
- 3 Optimal quantity, with the tie explained ½ mark 1 min
Short on time? Step 2 carries 1 of the 2 marks: guard its minutes.
Try it first. About 4 minutes for 2 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
The rule at the margin. A rational decision maker thinks in small steps: she compares the benefit of one more unit with what it costs her, and takes the step only if it is worth it. Here the cost of one more burger is its price, ₹60, and its benefit is its marginal benefit, the change in total benefit. So she keeps buying while the next burger's marginal benefit is at least ₹60 and stops before one whose marginal benefit is below ₹60.
Marginal benefit against the price.
| Burger | Marginal benefit (₹) | Price (₹) | Worth buying? |
|---|---|---|---|
| 1st | 180 | 60 | Yes: adds ₹120 more than it costs |
| 2nd | 120 | 60 | Yes: adds ₹60 more than it costs |
| 3rd | 84 | 60 | Yes: adds ₹24 more than it costs |
| 4th | 60 | 60 | Neither gain nor loss: benefit equals price |
| 5th | 36 | 60 | No: costs ₹24 more than it adds |
| 6th | 24 | 60 | No: costs ₹36 more than it adds |
The tie at the fourth burger. The fourth burger adds exactly ₹60 of benefit and costs ₹60, so buying it leaves her neither better nor worse off: her net benefit (total benefit minus spending) is ₹384 − ₹180 = ₹204 with three burgers and ₹444 − ₹240 = ₹204 with four. Both 3 and 4 burgers are therefore optimal; the fifth would lower her net benefit by ₹24.
Answer. At ₹60 a burger it is optimal to consume 4 burgers a week, the largest number at which the marginal benefit (₹60) is not below the price; 3 burgers give the same net benefit of ₹204, because she is indifferent about the fourth.
Where the 2 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | The marginal rule, benefit of one more unit against its cost | 0.5 |
| 2 | Each burger compared with the price of ₹60 | 1 |
| 3 | Optimal quantity, with the tie explained | 0.5 |
| Total | 2 |
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