Question

Bob consumes food and housing. Suppose his marginal utility from an additional unit of food is 50 and his marginal utility from an additional unit of housing is 200. ​ Furthermore, suppose the price of a unit of food is ​$1.00 and the price of a unit of housing is ​$5.00. Can Bob increase his utility without changing his total expenditures on food and​ housing

Answer 1

Bob can increase his utility by spending more on food and less on housing.

Step-by-step explanation:

If Bob reduces 1 unit of housing his total utility will decrease by 200, but he will be able to save $5. If Bob uses these $5 to purchase more food units, he will be able to buy 5 more units of food which will increase his total utility by 250.

So for every unit of housing that Bob decides to change for 5 units of food, his total utility will increase by 50.