Table 7-5
$$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Quantity of } \
\text { Burgers }
\end{array} & \begin{array} { c }
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array} { c }
\text { Quantity of } \
\text { Pepsi }
\end{array} & \begin{array} { c }
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 20 & 1 & 30 \
\hline 2 & 14 & 2 & 10 \
\hline 3 & 10 & 3 & 7 \
\hline 4 & 3 & 4 & 5 \
\hline 5 & 1 & 5 & 1 \
\hline 6 & - 5 & 6 & 0 \
\hline 7 & - 10 & 7 & - 4 \
\hline
\end{array}$$
Table 7-5 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 7-5.What is Jay's optimal consumption bundle?

Question

Table 7-5
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Burgers }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Pepsi }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 20 & 1 & 30 \
\hline 2 & 14 & 2 & 10 \
\hline 3 & 10 & 3 & 7 \
\hline 4 & 3 & 4 & 5 \
\hline 5 & 1 & 5 & 1 \
\hline 6 & - 5 & 6 & 0 \
\hline 7 & - 10 & 7 & - 4 \
\hline
\end{array}$$ 
Table 7-5 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 7-5.What is Jay's optimal consumption bundle?

Quizplus · Accepted Answer

To maximize utility, Jay should spend all $7 on the goods that provide him the most marginal utility per dollar. From the table, we can see that the marginal utility per dollar for the second burger is 7 ($14/$2) and the marginal utility per dollar for the third Pepsi is 7 ($7/$1). Therefore, Jay should buy 2 burgers and 3 Pepsis for a total cost of $7. This combination will give him the highest utility.

Table 7-5 Table 7-5 Lists Jay's Marginal Utilities for Burgers and Pepsi