Homework Answers
Solution: No, he should eat more cookies and drink less milk
Explanation: For utility maximization, Jose must set his consumption in an approach that the marginal utility per dollar (MU/p) of the last unit consumed is same as the across commodities; however it is not equal in the given case as per below calculation:
|
Cookies |
Milk |
|
|
MU |
30 |
24 |
|
Price |
2 |
3 |
|
MU/Price |
15 |
8 |
As the marginal utility per dollar is higher for cookies thus Jose should reduce the consumption of milk and increase his consumption of cookies
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