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Suppose that you are vacationing at a resort in the Caribbean and you are trying to determine how to spend your time and money on two activities, windsurfing and snorkelling, which both cost $6 per hour

Economics

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Suppose that you are vacationing at a resort in the Caribbean and you are trying to determine how to spend your time and money on two activities, windsurfing and snorkelling, which both cost $6 per hour. The marginal utility of the activities are shown in table below. No. of Hours 1 2 3 WINDSURFING Marginal Marginal Utility Total Utility Utility per Dollar Spent 90 90 15) 85 175 14751 70 245 11.671 65 310 10.83 60 370 101 45 415 7.51 35 450 5.831 10 460 1.671 SNORKELLING Marginal Marginal Total Utility Utility per Utility Dollar Spent 95 95 15.83 85 1801 14.17 70 250 11.671 60 3101 10 45 355 7.51 20 3751 3.33 15 3901 2.5 5 3951 0.83 4 5 6 7 8 a) Complete the columns for total utilities in the above table. b) Assume that you have a budget of $42. To maximize your total utility, how would you allocate your budget between the two activities? What is the resulting total utility? Windsurfing: 5 hours 6 and Snorkelling: $ 6 and hours Total utility: 560 utils c) At the end of the day, you dig deep into your pocket and discover an extra $12. How would you allocate your higher budget between the two activities so as to maximize your total utility? What is the resulting total utility? Windsurfing: 5 6 and hours Snorkelling: $ and hours Total utility: 680utils d) Suppose that your utility from the two activities remains unchanged the next day, when you again arrive with $42 in your pocket. Unfortunately, you discover that the hourly charge for snorkelling has increased to $12. Complete the marginal utility per dollar columns in the table above. Round your answers to 2 decimal places.
e) How will you now allocate your expenditures to maximize your total utility, assuming that partial hours cannot be purchased? Windsurfing: 5 d and hours Snorkelling: 5 12 and hours Total utility: 405 utils f) Given your answers in b) and e), at a budget of $42 draw the demand curve for snorkelling. Plot only the endpoints in the graph below. Show the effects of the change in the price of snorkelling in the graph. Use the drop-ine tool to show the change in price 15 Price per hour ($) 10 Numberaf hous reset g) What has happened to the demand for windsurfing?