If the price of a cheeseburger is $2 and the price of a bag of french fries is $1, and you have $7 to spend (and you can spend all of it). What is the utility-maximizing combination of cheeseburgers and french fries?
Wouldn't that depend on the utility value of the cheesburger, and the fries? In my case, I hate fries. So for me, three lucious cheesburgers would be it. No fries. Now for my salt loving daughter, she would probably have one cheesburger and the rest in fries.
So what I am suggesting, if one wants to maximize utility, the value of each item has to be included, not just the cost function.
Thanks Bob. I just posted the utilities for both. Can you please help us figure this out? We need it by midnight tonight.
Thanks so much.
Tracci
1 answer
Assuming that the utility of a cheeseburger is higher than that of a bag of french fries, the utility-maximizing combination would be to purchase 3 cheeseburgers and 1 bag of french fries. This would give you the highest utility for the given amount of money.
1 answer