-Liz consumes two goods,candy bars and potato chips.Her budget is $4 per day.The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents.Her utility is in the table above.For Liz to maximize her utility,what combination of candy bars and potato chips should she eat?

Question

Quizplus · Accepted Answer

To maximize utility, Liz should allocate her budget such that the marginal utility per dollar spent is equal for both goods. With $4, she can buy 2 candy bars ($2) and 4 bags of chips ($2), which maximizes her utility given the prices and her budget.

-Liz Consumes Two Goods,candy Bars and Potato Chips