Ken consumes two goods,Sprite and potato chips.Sprite costs $2 per can,and he consumes it to the point where the marginal utility he receives from his last Sprite is 4.Potato chips cost $3 per bag,and the relationship between the marginal utility he gets from eating a bag of potato chips and the number of bags he eats per month is as follows:

If Ken is maximizing his utility,how many bags of potato chips does he buy each month?

Question

Ken consumes two goods,Sprite and potato chips.Sprite costs $2 per can,and he consumes it to the point where the marginal utility he receives from his last Sprite is 4.Potato chips cost $3 per bag,and the relationship between the marginal utility he gets from eating a bag of potato chips and the number of bags he eats per month is as follows:

If Ken is maximizing his utility,how many bags of potato chips does he buy each month?

Quizplus · Accepted Answer

To maximize utility, Ken should allocate his spending such that the marginal utility per dollar spent is equal across both goods. Let MU_Sprite and MU_Chips denote the marginal utility Ken receives from consuming Sprite and potato chips, respectively. Then
MU_Sprite/P_sprite = MU_Chips/P_chips
4/2 = MU_Chips/3
MU_Chips = 6
From the graph, we see that Ken receives a marginal utility of 6 from the fourth bag of potato chips. Thus, he should buy 4 bags of potato chips each month to maximize his utility.

Ken Consumes Two Goods,Sprite and Potato Chips