Question

Joe is maximizing utility by consuming three colas at $2 apiece and four hot dogs at $3 apiece. The last cola gave him 200 units of utility. How many units of utility did the last hot dog give him?

Answer 1

Answer: The last hot dog give him 300 units of utility.

Explanation:

Since we have given that

Number of colas say = 3

Cost of a piece say 'x' = $2

Number of hot dogs say 'y' = 4

Cost of a piece say 'y' = $3

Marginal utility for the last cola = 200 units.

We need to maximise the utility and find the number of units of utility that the last hot dog give him.

As we know the "Consumer's equilibrium using Two commodities:

`(MU_x)/(x)=(MU_y)/(y)\\\\(200)/(2)=(MU_y)/(3)\\\\100* 3=MU_y\\\\MU_y=300\ units`

Hence, the last hot dog give him 300 units of utility.