|
3. If we know that Joe buys 3 novels each month, we know that the range of possible prices, from maximum to minimum must be:
It's useful for us to, once again, examine the marginal utility numbers that this table yields. Once we have these it's fairly simple to see the answer. Joe's marginal utility for the third novel is $18 so that is the most he would pay for a third book. If the price were any higher at all he would buy fewer than 3. His marginal utility for the fourth is $14 so this is the lowest the price could be. If it were any lower he would buy at least 4.
|
| Joe's Utility |
| Novels | Utility in $ | MU |
| 0 | $0 | $0 |
| 1 | $25 | $25 |
| 2 | $45 | $20 |
| 3 | $63 | $18 |
| 4 | $77 | $14 |
| 5 | $88 | $11 |
| 6 | $96 | $8 |
|
