7. MRS and utility maximization Poornima lives in Miami and loves to eat desserts. She spends her entire weekly allowance on jello and pie. A bowl of jello is priced at $1.0 piece of apple pie is priced at $4.00. At her current consumption point, Poornima's marginal rate of substitution (MRS) of jello for pie is 5. that Poornima is willing to trade five bowls of jello per week for one piece of pie per week. Does Poornima's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to her utility? Poornima could increase her utility by buying less jello and more pie per week. Poornima's current bundle maximizes her utility, and she should keep it unchanged. Poornima could increase her utility by buying more jello and less pie per week.
7. MRS and utility maximization Poornima lives in Miami and loves to eat desserts. She spends her entire weekly allowance on jello and pie. A bowl of jello is priced at $1.0 piece of apple pie is priced at $4.00. At her current consumption point, Poornima's marginal rate of substitution (MRS) of jello for pie is 5. that Poornima is willing to trade five bowls of jello per week for one piece of pie per week. Does Poornima's current bundle maximize her utility-in other words, make her as well off as possible? If not, how should she change it to her utility? Poornima could increase her utility by buying less jello and more pie per week. Poornima's current bundle maximizes her utility, and she should keep it unchanged. Poornima could increase her utility by buying more jello and less pie per week.
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 8P
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