Engage with knowledgeable experts and get accurate answers on IDNLearn.com. Our community is here to provide the comprehensive and accurate answers you need to make informed decisions.
Mary derives utility from buying pizza and ice cream during lunch.
Mary gets 12 units of marginal utility from her first pizza, 8 units of marginal utility from her second pizza, 4 units of marginal utility from her third pizza, and so on, with marginal utility declining for each additional pizza.
Mary gets 5 units of marginal utility from her first ice cream, 4 units of marginal utility from her second ice cream, 1 units of marginal utility from her third ice cream, and so on, with marginal utility declining for every additional ice cream consumed.
A pizza costs $2 but a ice cream costs only $1. Mary has $4 to spend on lunch.
assuming that you can also buy half a pizza. Start off with the choice of zero pizzas and 4 ice creams, and calculate the changes in marginal utility of moving along the budget line to the next choice of half a pizza and 3 ice cream.
Using this step-by step process based on marginal utility, create a table and identify Mary’s utility-maximizing choice. Compare the marginal utility of the two goods and the relative prices at the optimal choice to see if the expected relationship holds.
Sagot :
We appreciate your contributions to this forum. Don't forget to check back for the latest answers. Keep asking, answering, and sharing useful information. IDNLearn.com has the answers you need. Thank you for visiting, and we look forward to helping you again soon.
