Homework Help: macro econ

Posted by joy on Sunday, November 29, 2009 at 4:39pm.

Need help
if bridget has wine and cheese. 4 bottle of wine at 10.00 and 4lbs of chesse 4.00. The last bottle of wine added 50 units to bridgt utility, while the last pound of cheese added 40 units.
Is bridget makeing the utility maximaizing choice if so why if not why.
My answer
No
if u= f (x,y0
50=(10,4)+ (10,4)
2000 + 1600
I am stuck or am i going in the right direction

macro econ - economyst, Monday, November 30, 2009 at 9:17am
No, you are way off track. For utility maximization in spending on goods, you want the spend where the marginal utility per dollar is the highest. So, if MUx/Px is greater than MUy/Py then spend more on x and perhaps less on y.

I presume your "10.00" is the price per bottle of wine rather than the price for the 4 bottles. Ditto for the cheese.

So MU/P of wine is 50/10 = 5. MU/P of cheese is 40/4=10. Bridget should buy more cheese and less wine.

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