Equi marginal principle A Level Econ WKS

The worksheet is designed to be used after teaching the Equi-Marginal principle or could be used to teach it. Part a of the first question requires students to complete two tables for crisps and biscuits respectively, both priced at £1 per pack. Figures are provided in part for total and marginal utility from first to eighth pack of each good, students need to fill in the blanks and calculate Marginal utility per £ spent for each good. Part b then requires students to complete a third table to show how a rational consumer would spend a budget of £8 based on their answers to part a, this then leads to part c where students based on their answer to b have to state the demand for each good at a price of £1. Finally in part d students are required to use the equi-marginal principle formula to prove that the rational consumer would maximise their utility by consuming the number of crisps and number of biscuits that they have worked out in part b, in order to maximise their utility.

The second question is the same as Question 1 in parts a-d, except a pack of crisps is now priced at £4 and biscuits at £2. In part a students calculate MU per £ spent for each good based on their new prices, in part b they decide how the rational consumer would now spend each £ of their £8 budget, in partc they state demand at the new prices and in part d they once again proove the equi-marginal principle. There are then two written questions part e for 4 marks requires students to explain by using the concept of marginal utility per £ spent why demand for crisps falls by more than demand for crisps following the price rises. Part f is an 8 mark evaluation question that requires students to evaluate the extent to which the idea of the rational consumer and marginal utility theory can be of value to firms when making pricing decisions.

The first question could be used to introduce the concept and the calculations and completed as a worked example in the lesson. Students could be encouraged to discuss how the theory suggests rational behavior and then evaluate it’s application in the real world. Question 2 could then be used for homework.

A full mark scheme is provided based on the OCR H460 A Level Economics course. However, could be easily adapted and used for other boards.