Table 10-5
Table 10-5 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 10-5.What is Jay's optimal consumption bundle?

Question

Table 10-5
  Table 10-5 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 10-5.What is Jay's optimal consumption bundle?

Quizplus · Accepted Answer

To find Jay's optimal consumption bundle, we need to find the combination of burgers and Pepsis that maximizes his satisfaction (utility) while staying within his budget constraint. We can do this by calculating the marginal utility per dollar for each good. The marginal utility per dollar of burgers is 7/2 = 3.5, and the marginal utility per dollar of Pepsis is 12/3 = 4. Therefore, Jay should consume more Pepsis and fewer burgers to increase his satisfaction. The bundle that maximizes his utility while staying within his budget constraint is 2 burgers and 3 Pepsis, which cost $7 (2 x $2 + 3 x $1 = $7) and give Jay a total utility of 42 (24 + 18). Therefore, the best choice is option B.

Table 10-5 Table 10-5 Lists Jay's Marginal Utilities for Burgers