5 Your marginal utility for each of 7 cheeseburgers is 30 25

5) Your marginal utility for each of 7 cheeseburgers is 30, 25, 20, 15, 10, 5, 0 and the price of a cheeseburger $5.00

Your marginal utility for each of 8 slices of anchovy pizza is 32, 28, 24, 20, 16, 12, 8, 4 and the price of a slice of pizza is $3.00

You have $33.00 to spend. How many cheeseburgers and pizza slices would you buy to maximize your utility?

Solution

Ans : You will purchase 3 units of cheeseburgers and 6 units of pizza to maximize your utility.

Explanation:

This is shown in the following table.

The condition of consumer equilibrium ;

MUa / Pa = MUb / Pb

Here the budget constraint is $ 33.00

So with this amount , 3 units of cheeseburgers and 6 units of piza can be purchased as per following;

3 units of cheeseburgers * per unit price of cheeseburgers + 6 units of pizza * per unit price of pizza

= 3 * $ 5 + 6 * $ 3

= $15 + $ 18

= $ 33.00