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4.1 Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), and these provide him a utility of utility = U(t, s) = √ts. a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his mother gives him to maximize his utility? b. If the school tries to discourage Twinkie consumption by increasing the price to $0.40, by how much will Paul's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?

4.1 Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), and these provide him a utility of utility = U(t, s) = √ts. a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his mother gives him to maximize his utility? b. If the school tries to discourage Twinkie consumption by increasing the price to $0.40, by how much will Paul's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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4.1 Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), and these provide him a utility of utility = U(t, s) = √ts. a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his mother gives him to maximize his utility? b. If the school tries to discourage Twinkie consumption by increasing the price to $0.40, by how much will Paul's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?
Transcribed Image Text:4.1 Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), and these provide him a utility of utility = U(t, s) = √ts. a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his mother gives him to maximize his utility? b. If the school tries to discourage Twinkie consumption by increasing the price to $0.40, by how much will Paul's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?
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