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Sharon purchases two products with a given fixed budget, orange juice and soda. Her marginal utility from orange juice is 60, and her marginal utility from soda is 30. The price of a bottle of orange juice is $2.00, and the price of soda is $1.00. These data suggest that:

A. Is maximizing her total utility from the given fixed budget
B. Should buy more X and less Y
C. Should but more Y and less X
D. Should buy less Y and X

User Max Tilley
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1 Answer

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Final answer:

Sharon's current marginal utility per dollar for both orange juice and soda is the same, implying she is already maximizing her utility with the given budget. There is no immediate need for her to adjust her purchases unless quantities consumed alter the marginal utility per dollar of her purchased goods.

Option 'a' is the correct.

Step-by-step explanation:

Sharon is facing a choice between purchasing two products, orange juice and soda, given her fixed budget. The question asked is which course of action Sharon should take to maximize her total utility from her fixed budget. The marginal utility per dollar is critical in making this decision.

The marginal utility per dollar is the marginal utility received from each dollar spent on a good or service.

In Sharon's case, the marginal utility per dollar for orange juice is 30 (60 marginal utility / $2 price), and for soda, it is 30 (30 marginal utility / $1 price).

Since the marginal utility per dollar for both goods is the same, it suggests that Sharon is already maximizing her total utility given her budget constraints. Therefore, she does not necessarily need to change her consumption between orange juice and soda on the basis of marginal utility per dollar.

However, if the question suggests that we should consider more purchases of either good, Sharon's optimal consumption bundle would maintain an equal marginal utility per dollar for both goods. If the marginal utility per dollar changes due to further consumption of one good, she should adjust her purchasing to equalize the marginal utility per dollar across both goods, according to the principle of utility maximization.

User Damian Drygiel
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