Question

Bill uses his entire budget to purchase Pepsi and​ hamburgers, and he currently purchases no Pepsi and 6 hamburgers per week. The price of Pepsi is​ $1 per​ can, the price of a hamburger is​ $2, Bill's marginal utility from Pepsi is​ 2, and his marginal utility from hamburgers is 6. Is​ Bill's current consumption decision​ optimal

Answer 1

The answer is: Yes, Bill's consumption decision is optimal.

Step-by-step explanation:

Bill's marginal utility from consuming Pepsi is 2 units and Pepsi costs $1. So for every dollar Bill spends in Pepsi, he gets 2 units of utility.

Bill's marginal utility from consuming hamburgers is 6 units and each hamburger costs $2. So for every dollar Bill spends in hamburger, he gets 3 units of utility.

Bill's total budget is $12, and he gets 36 units of utility by consuming hamburgers. If he consumed Pepsi, he would get only 24 units of utility with the same budget.