Question

Simone 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 $1.50, and a piece of apple pie is priced at $4.50. At her current consumption point, Simone's marginal rate of substitution (MRS) of jello for pie is 4. This means that Simone is willing to trade four bowls of jello per week for one piece of pie per week.Does simone current bundle maximize his utility?

Answer 1

Consumer choice and utility maximization in economics involve using various tools to analyze decisions on budget allocation for maximum total utility, such as indifference curves, budget constraints, and the marginal rate of substitution.

Step-by-step explanation:

The information provided pertains to consumer choice and the utility-maximization process within the subject of Economics. This concept is often discussed in the context of microeconomics, which is typically taught at the high school or college level.

In examining choices and utility maximization, we need to consider concepts like indifference curves, budget constraints, the marginal rate of substitution (MRS), and opportunity cost. These tools and ideas help to analyze how consumers make decisions to allocate their budget in a way that maximizes their total utility. More specifically, consumers will generally want to consume at a point on their budget constraint that is tangent to the highest possible indifference curve, as this combination represents the maximum satisfaction or utility they can attain given their budget limitations.

Answer 2

The correct answer is: No.

Step-by-step explanation:

Simone consumes jello and pie.

The price of a bowl of jello is $1.50.

The price of an apple pie is $4.50.

Simone's marginal rate of substitution of jello for pie is 4.

Her utility from the current consumption of jello and pie will be maximized if the ratio of prices of two goods will be equal to the marginal rate of substitution.

The ratio of prices of jello and pie is

=
`(4.50)/(1.50)`

= 3

The marginal rate of substitution is higher than the ratio.

So, Simone can increase her utility by consuming more pie and less jello.