Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a warm-up suit is four times the price per pair of shoes.Then,in order to maximize total utility,Jeffrey should

Question

Quizplus · Accepted Answer

To maximize total utility, Jeffrey should allocate his income in a way that equalizes the marginal utility per dollar spent on both warm-up suits and running shoes. Let's assume that the price of a pair of running shoes is $x. According to the problem, the price of a warm-up suit is $4x.

Jeffrey should continue buying both items until the marginal utility per dollar spent on warm-up suits is four times the marginal utility per dollar spent on running shoes. At that point, buying an additional unit of a warm-up suit will provide four times more utility than buying an additional pair of running shoes.

Therefore, option D is the best choice since it states that Jeffrey should buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes.

Jeffrey Spends All of His Income on Warm-Up Suits and Running