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I currently have a table like so:

Hours spent on Activity X | Total Utility

  1. 120
  2. 220
  3. 300
  4. 360
  5. 396
  6. 412

I know that Marginal Utility is calculated use slope formulate (delta Y / delta X). I am asked to calculate the MU for 5 hours: So in this case, $delta X = 5 - 1 = 4$ and $deltaY = 396 - 120 = 276$ Then, MU = $deltaY/deltaX = 276/4 = 69$

Next I am supposed to calculate the MU per dollar, which is determined by: $deltaY/deltaX * 1/Price$ . The question states the price of activity X is $5/hour.

Then, I would have $MU per dollar = 69/5 = 13.8$ This gives me 13.8 dollars as the MU per dollar, however, the answer to this question is 7.2 dollars. Can anyone please explain where I've gone wrong?

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2  
Your title is not informative. –  lhf Jun 20 '13 at 16:26
    
Sorry, I've edited my title. –  0xFF Jun 20 '13 at 16:27
    
I liked the previous title anyway. :) –  Moron plus plus Jun 20 '13 at 16:45

1 Answer 1

up vote 2 down vote accepted

Actually you are calculating MU wrong $$\frac{\Delta Y}{\Delta X}=\frac{Y_5-Y_4}{X_5-X_4}=\frac{396-360}{5-4}=36$$ $$\Rightarrow \text{MU}_\text{per dollar}=36/5=7.2$$

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I think @oxFF says he/she is "asked to calculate the MU for 5 hours." But in my opinion this answer is for the fifth hour, not for the entire five hours? –  Fang Jing Jun 21 '13 at 1:12
    
In economics marginals are instantenous changes. If OP would have asked for five hours OP would have said "average". –  Occupy Gezi Jun 21 '13 at 8:15

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