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
Related questions
Question
Give correct answer please? answer and explain
Transcribed Image Text: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 $1.00, and a
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. This means
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 maximize
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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning