If the price of a cheeseburger is $2, the price of a bag of french fries is $1, and you have $6 to spend (and you spend all of it), what is the utility-maximizing combination of cheeseburgers---and french fries---?
To determine the utility-maximizing combination of cheeseburgers and French fries, we need to consider their respective prices and the budget constraint.
Since the price of a cheeseburger is $2 and the price of a bag of French fries is $1, with a budget of $6, we can consider different combinations to maximize utility.
If we let x represent the number of cheeseburgers and y represent the number of bags of French fries, the budget constraint can be expressed as:
2x + 1y = 6
To determine the utility-maximizing combination, we need to consider the marginal utility of each item. Assuming both cheeseburgers and French fries provide positive utility and the marginal utility is diminishing, we can construct an indifferent curve to analyze the optimal combination.
Let's assume the marginal utility (MU) of cheeseburgers is decreasing at a faster rate than the MU of French fries, meaning that the MU of fries diminishes less rapidly compared to cheeseburgers.
Suppose the MU of cheeseburgers is greater than the MU of French fries (MUc > MUs). Based on the concept of diminishing marginal utility, purchasing more French fries relative to cheeseburgers would lead to a higher overall utility.
For instance, if the MU of cheeseburgers declines more rapidly, it may be more beneficial to allocate more resources to French fries. Therefore, we could consider allocating more spending towards French fries compared to the cheeseburgers.
Let's consider some combinations:
Combination 1: 3 cheeseburgers and 0 fries
Total cost: 2 * 3 + 1 * 0 = 6
Combination 2: 2 cheeseburgers and 2 fries
Total cost: 2 * 2 + 1 * 2 = 6
Combination 3: 1 cheeseburger and 4 fries
Total cost: 2 * 1 + 1 * 4 = 6
Combination 4: 0 cheeseburgers and 6 fries
Total cost: 2 * 0 + 1 * 6 = 6
If each combination provides positive utility, it's essential to determine the exact utilities associated with each item and combination to determine the utility-maximizing choice.
Keep in mind that utility is subjective and varies among individuals, so the specific utility-maximizing combination may differ depending on personal preferences.
To determine the utility-maximizing combination of cheeseburgers and french fries, we need to consider your budget constraint and the utility derived from consuming each item.
Given that the price of a cheeseburger is $2 and the price of a bag of french fries is $1, let's allocate x as the number of cheeseburgers and y as the number of bags of french fries.
Since you have a budget of $6, we can set up the equation:
2x + 1y = 6
To maximize utility, we need to consider the satisfaction or utility derived from consuming each item. However, we need more information about the utility function or preferences to provide a specific answer.
If we assume that the utility derived from consuming each item is equal (i.e., one cheeseburger is equally satisfying as one bag of french fries), we can allocate the budget equally between the two items.
For this case, the utility-maximizing combination would be to spend half of the budget on cheeseburgers and half on french fries. Since each cheeseburger costs $2 and each bag of french fries costs $1, we can calculate the allocation as follows:
Budget for cheeseburgers = $6 / (cost per cheeseburger)
= $6 / $2
= 3 cheeseburgers
Budget for french fries = $6 / (cost per bag of french fries)
= $6 / $1
= 6 bags of french fries
Therefore, the utility-maximizing combination would be 3 cheeseburgers and 6 bags of french fries.
To find the utility-maximizing combination of cheeseburgers and french fries, we need to consider the concept of marginal utility. Marginal utility is the additional satisfaction or benefit derived from consuming one more unit of a good or service.
In this case, let's assume that the marginal utility of each cheeseburger and french fry is constant. It means that each additional cheeseburger or french fry will provide the same level of satisfaction.
To determine the optimal combination, we can compare the marginal utility per dollar for both items. We divide the marginal utility by the price for each item to find the marginal utility per dollar.
Given that a cheeseburger costs $2 and a bag of fries costs $1, let's assume that the marginal utility for each cheeseburger is 8, and for each french fry, it is 6.
For the cheeseburger:
Marginal utility per dollar = marginal utility / price = 8 / 2 = 4.
For the french fries:
Marginal utility per dollar = marginal utility / price = 6 / 1 = 6.
To maximize utility, we should allocate the dollars to the item with the highest marginal utility per dollar, which, in this case, is french fries. Therefore, if we spend all $6, we should buy six bags of french fries.
Please note that the example assumes constant marginal utility and simplified values for illustration purposes. In reality, marginal utility may vary and depend on individual preferences and other factors.