Tom has a budget of $44 per week that he can spend on Ramen and/or steak burritos. Each burrito costs $10 and each bowl of Ramen is $6. Using the table below, what combination of these two goods will maximize Tom’s utility given his budget constraint?
Tom has a budget of $44 per week that he can spend on Ramen and/or steak burritos. Each burrito costs $10 and each bowl of Ramen is $6. Using the table below, what combination of these two goods will maximize Tom’s utility given his budget constraint?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Tom has a budget of $44 per week that he can spend on Ramen and/or steak burritos. Each burrito costs $10 and each bowl of Ramen is $6. Using the table below, what combination of these two goods will maximize Tom’s utility given his budget constraint?
Transcribed Image Text:This table presents data on the utility derived from consuming ramen and steak burritos per week.
**Ramen Consumption:**
- **Ramen per week:** Indicates the number of ramen servings consumed weekly.
- **Total Utility (ramen):** Represents the total satisfaction or utility obtained from consuming ramen.
- **Marginal Utility (ramen):** Shows the additional utility gained from consuming one more serving of ramen.
**Data for Ramen:**
- 0 servings: Total Utility = 0, Marginal Utility = -
- 1 serving: Total Utility = 140, Marginal Utility = 140
- 2 servings: Total Utility = 260, Marginal Utility = 120
- 3 servings: Total Utility = 360, Marginal Utility = 100
- 4 servings: Total Utility = 450, Marginal Utility = 90
**Steak Burrito Consumption:**
- **Steak Burritos per week:** Indicates the number of steak burritos consumed weekly.
- **Total Utility (burritos):** Represents the total satisfaction or utility obtained from consuming burritos.
- **Marginal Utility (burritos):** Shows the additional utility gained from consuming one more burrito.
**Data for Steak Burritos:**
- 0 burritos: Total Utility = 0, Marginal Utility = -
- 1 burrito: Total Utility = 160, Marginal Utility = 160
- 2 burritos: Total Utility = 310, Marginal Utility = 150
- 3 burritos: Total Utility = 410, Marginal Utility = 100
- 4 burritos: Total Utility = 450, Marginal Utility = 40
This data illustrates the concept of diminishing marginal utility, where each additional unit consumed provides a decreasing amount of additional satisfaction.
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