Isobel consumes positive quantities of both jam and juice.The price of jam is 5 cents per unit and the price of juice is 10 cents per unit.Her marginal utility of jam is 10 and her marginal utility of juice is 5.
A)Without changing her total expenditures, she could increase her utility by consuming more jam and less juice.
B)Without changing her total expenditures, she could increase her utility by consuming more juice and less jam.
C)Without changing her total expenditures on jam and juice, she could not increase her utility.
D)She should spend more money on both jam and juice.
E)We can't tell whether any of the other statements are true or false without knowing the quantities she consumes.

Question

Quizplus · Accepted Answer

Isobel's marginal utility per unit of jam is higher than her marginal utility per unit of juice, indicating that she values jam more than juice. Therefore, to maximize her utility without increasing her total expenditure, she should consume more of the cheaper good (jam) and less of the more expensive good (juice). This would increase her total utility by shifting towards the good that gives her higher marginal utility per unit.

Isobel Consumes Positive Quantities of Both Jam and Juice