Nathalie is maximising total utility while consuming food and clothing. Her marginal utility from food and clothing is 50 and 25, respectively. If clothing is priced at R100 per unit, the price of food must

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Quizplus · Accepted Answer

To maximize utility, the ratio of marginal utility to price should be equal for all goods. Therefore, MU_food/Price_food = MU_clothing/Price_clothing. Given MU_food = 50, MU_clothing = 25, and Price_clothing = R100, Price_food must be R200 to satisfy 50/Price_food = 25/100.

Nathalie Is Maximising Total Utility While Consuming Food and Clothing