We can determine the price of pizza by comparing the marginal utility per rand of beer and pizza.
The marginal utility per rand of pizza is calculated as follows:
Marginal utility of pizza / Price of pizza = 36 / P
The marginal utility per rand of beer is calculated as follows:
Marginal utility of beer / Price of beer = 30 / 25.75
Since Fred has maximized his utility, the marginal utility per rand of pizza must equal the marginal utility per rand of beer:
36 / P = 30 / 25.75
36 * 25.75 = 30 * P
927 = 30P
P = 927 / 30
P = 30.9
Therefore, the price of pizza is approximately R30.90.
In spending all his income on beer and pizza, Fred finds that the marginal utility of the last pizza is currently 36, the marginal utility of the last bottle of beer is 30, and the price of a bottle of beer is R25. 75. If Fred has maximized his utility, the price of pizza is
1 answer