Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar...
Suppose Abe is allocating his entire income and he receives 100 units of utility per dollar from the tenth slice of pizza and 200 units of utility per dollar from his second soda. Is Abe maximizing his utility? Should Abe change his consumption of pizza and soda?
Homework Answers
Abe is not maximizing utility.
According to the principle of equimarginal utility, a consumer maximizes utility when the last dollar spent on different goods yield same utility. Here, the last dollar spent on two goods are fetching different level of utilities. So, Abe is not maximizing utility.
Abe needs to change his consumption of pizza and soda. Abe should consume more soda and less pizza untill the last dollar spent on pizza and soda yield same utility.
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Suppose Abe is allocating his entire income and he receives 100
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