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Utility maximization.
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Explanation of Solution
The person’s income is $100 and the person spends all the money to buy a meal, which costs $10 per meal. Thus, the person buys10
Since the meal’s marginal utility per dollar is greater than the marginal utility per dollar for the movie, it is concluded that the person did not maximized his utility.
Concept Introduction:
Utility maximization: When a person consumes two different goods simultaneously, the person can maximize his or her utility at the point where the marginal utility per dollar derived from both the goods becomes equal. This can be written as follows:
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Chapter 25 Solutions
Modern Principles: Microeconomics
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