3. Finding the optimal combination of two goods Valerie enjoys consuming both gu

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3. Finding the optimal combination of two goods Valerie enjoys consuming both guacamole and salsa. Each jar of guacamole costs , and each jar of salsa costs . Suppose that Valerie buys 300 jars of guacamole and 200 jars of salsa per year. The following graphs show her marginal utility curves for guacamole and salsa. At her current consumption level, Valerie's marginal utility from consuming the last jar of guacamole she bought is utils per jar, and her marginal utility from consuming the last jar of salsa she bought is utils per jar.

Consumer Choice: Maximizing Utility and Behavioral Economics Graded Assignment Read Chapter 21 | Back to Assignment Due Sunday 11.05.17 at 11:45 PM Attempts 1.3 Average: 1.3/3 3. Finding the optimal combination of two goods Valerie enjoys consuming both guacamole and salsa. Each jar of guacamole costs PG-$1, and each jar of salsa costs Ps= $2, suppose that Valerie buys 300 jars of guacamole and 200 jars of salsa per year. The following graphs show her marginal utility curves for guacamole and salsa. At her current consumption level, Valerie's marginal utility from consuming the last jar of guacamole she bought is MUG 30 utils per jar, and her marginal utility from consuming the last jar of salsa she bought is Mus-30 utils per jar 50 20 10 10 0 100 200 300 400 500 600 GUACAMOLE (Jars) 0 100 200 300 400 500 600 SALSA (Jars)

Explanation / Answer

1) The answer is D-) Yes ; the marginal utility she recives from her last jar of guacamole equals that of her last jar of salsa.

because, The marginal Utility of last jar of guacamole and last jar of salsa are equal that is 30 utilities. so Valerie is maximizing her utility.

2)

To maximize her utility , Valerie will purchase 500 Jars of guacamole and 400 Jars of salsa per year.

because, to maximize utility , MU1/P1 = MU2/P2 and all budget is exhausted.

here we can see , MUc/Pc = MUs/Ps = 10 at 500 units of guacamole and 400 units of Salsa.

Guacamole Combination Jars MUc/Pc A 200 40 B 400 20 C 300 30 D 500 10

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