Problem 1 Assume a budget of 150 per month to be spent on tw

Problem 1: Assume a budget of $150 per month to be spent on two goods: Cookies; and Chocolate Milk. Estimate the bundle that maximizes your well being: i) Glasses of Chocolate Milk; and(ii) Cookies tChoice Amount Budget Quantity nits Chocolate Milk ($20/Glass) Cookies ($10/Cookie) 150.00 Benefits Benefits Benefits Benefi 0 00.00 00.00 40.00 35.00 73.00 68.00 101.00 90.00 4 124.00 105.00 144.00 115.00 6 159.00 125.50 10 $000.00

Solution

CHOCOLATE MILK COOKIES # CHOICE AMOUNT BUDGET Quantity Total Marginal MB/$ Total Marginal MB/$ 150 Benefits Benefits Benefits Benefits 1 Cookies 10 10 0 0 0 0 0 0 0.00 140 1 40 40 2 35 35 3.50 2 Cookies 10 10 2 73 33 1.65 68 33 3.30 130 3 101 28 1.4 90 22 2.20 3 Cookies 10 10 4 124 23 1.15 105 15 1.50 120 5 144 20 1 115 10 1.00 4 Chocolate milk 20 20 6 159 15 0.75 126 11 1.10 100 5 Chocolate milk 20 20 80 6 Cookies 10 10 70 7 Chocolate milk 20 20 50 8 chocolate milk 20 20 30 9 chocolate milk 20 20 10 10 Cookies 10 10 Amount left 0 Therfore, Units of chocolate milk to be consumed: 5 units Units of Cookies to be consumed: 5 units