Question

The following table shows Madison's utility from consuming popcorn and Coke. Suppose that Madison has income of $25.50, the price of popcorn is $3.00, and the price of Coke is $6.75. If Madison wants to maximize her utility, how much popcorn and Coke should she buy? Popcorn Coke Marginal Utility 144 108 72 36 18 Quantity 192 144 96 48 24 12 4 6 Madison should buy boxes of popcorn andcans of Coke. (Enter your responses as integers,)

Answer 1

She should consume 4 boxes of popcorn and 2 cans of Coke. This is because the marginal utility per dollar of both these goods is 16 when this combination is purchased. This satisfies the principle of equimarginal utility where MU/$ for popcorn = MU/$ of coke and also consumes all income of 25.50.

MU popcorn	MU coke	MU/$ popcorn	MU/$ coke
192	144	64	21.33
144	108	48	16.00
96	72	32	10.67
48	36	16	5.33
24	18	8	2.67
12	9	4	1.33