Gavin is consuming beer and pizza such that his marginal rate of substitution between beer and pizza is 2 beers for 1 pizza. Gavin's income is S36 per week. Pizzas are priced at $4 each, and beers are priced at S1 each. Illustrate Manfred's situation in a budget constraint-indifference curve diagram. Is Gavin maximizing utility? Explain why or why not.

Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 1SQP
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Gavin is consuming beer and pizza such that his marginal rate of substitution between beer and pizza is 2 beers for 1 pizza. Gavin's income is S36 per week. Pizzas are priced at $4 each, and beers are priced at S1 each. Illustrate Manfred's situation in a budget constraint-indifference curve diagram. Is Gavin maximizing utility? Explain why or why not.
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