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 of a pair of shoes.In order to maximize total utility,Jeffrey should
A)buy four times as many warm-up suits as pairs of running shoes.
B)buy four times as many pairs of running shoes as warm-up suits.
C)buy both items until the marginal utility of a pair of running shoes is four times the marginal utility of a warm-up suit.
D)buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes.

Question

Quizplus · Accepted Answer

The optimal choice for Jeffrey is to continue buying both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes. This is because the price ratio of warm-up suits to running shoes is 4:1, meaning that if Jeffrey were to only buy one type of item, he would be sacrificing the potential utility he could derive from the other item. By maximizing the marginal utility of each item relative to their respective prices, Jeffrey can achieve the highest total utility from his income.

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