### Optimal Consumption CombinationThis table presents the total utility an individual gains from consuming cans of beer and slices of pizza per week. The price of a can of beer is $0.50, and the price of a slice of pizza is $1.00.#### Total Utility from Beer| Cans per Week | Total Utility ||---------------|---------------|| 1 | 15 || 2 | 29 || 3 | 42 || 4 | 54 || 5 | 65 || 6 | 75.75 || 7 | 86 || 8 | 96 || 9 | 105 || 10 | 113 |#### Total Utility from Pizza| Slices per Week | Total Utility ||-----------------|---------------|| 1 | 32 || 2 | 63 || 3 | 91 || 4 | 115.75 || 5 | 136 || 6 | 154 || 7 | 171 || 8 | 187 || 9 | 201 || 10 | 213 |If this consumer has $10.50 to spend on cans of beer and slices of pizza in any given week, then what is the optimal combination of beer and pizza for the consumer to buy to maximize utility?#### Explanation:Given the total amount of money available and the prices of beer and pizza, the consumer needs to allocate their spending to maximize total utility. Firstly, calculate the marginal utility per dollar for both beer and pizza for each additional unit consumed:For Beer:\[ \text{MU per dollar} = \frac{\Delta \text{Total Utility}}{\Delta \text{Cans/Cost}} \]For Pizza:\[ \text{MU per dollar} = \frac{\Delta \text{Total Utility}}{\Delta \text{Slices/Cost}} \]Now, based on these tables, the consumer should compare the marginal utility per dollar for both products and allocate their budget starting with the highest marginal utility per dollar until the budget is exhausted to achieve the optimal combination.

Budget Line 10.5 = 0.5B + P21 = B + 2P (By duviding 0.5) MU = Change in TU/Change in Q

Price of Can of Beer = $0.50 Cans per Week Price of Slice of Pizza = $1.00 Slices per Week %3D Total Utility Total Utility 15 1 32 2 29 63 3 42 3 91 4 54 4 115.75 5 65 5 136 75.75 6. 154 7 86 7 171 96 8 187 105 113 9. 201 10 10 213 If this consumer has $10.50 to spend on cans of beer and slices of pizza in any given week, then what is the optimal combination of beer and pizza for the consumer to buy to maximize utility?

Price of Can of Beer = $0.50 Cans per Week Price of Slice of Pizza = $1.00 Slices per Week %3D Total Utility Total Utility 15 1 32 2 29 63 3 42 3 91 4 54 4 115.75 5 65 5 136 75.75 6. 154 7 86 7 171 96 8 187 105 113 9. 201 10 10 213 If this consumer has $10.50 to spend on cans of beer and slices of pizza in any given week, then what is the optimal combination of beer and pizza for the consumer to buy to maximize utility?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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