Answer:
Step-by-step explanation:
To determine what Sally should do, we need to calculate the total utility that she derives from the pasta dinners and the salads, and compare it to the amount that she spends on them.
The total utility that Sally derives from the pasta dinners is:
10 * MUp = 10 * 30 = 300
where MUp is the marginal utility of the pasta dinners.
The total utility that Sally derives from the salads is:
20 * MUs = 20 * 30 = 600
where MUs is the marginal utility of the salads.
Therefore, the total utility that Sally derives from her purchases is:
Total utility = 300 + 600 = 900
The total amount that Sally spends on the pasta dinners and the salads is:
10 * $6 + 20 * $5 = $120 + $100 = $220
Since the total utility that Sally derives from her purchases is less than the amount that she spends, she should not continue to buy both pasta dinners and salads. Instead, she should purchase only the item with the higher marginal utility per dollar spent.
To determine which item this is, we can calculate the marginal utility per dollar for each item:
MUp / $6 = 30 / $6 = 5
MUs / $5 = 30 / $5 = 6
Since the marginal utility per dollar for the salads is higher than for the pasta dinners, Sally should only purchase salads in order to maximize her total utility within her budget. She could buy 32 salads with her monthly budget of $160, which would cost $160 and provide a total utility of 960 (32 * 30), which is greater than the total utility she gets from buying both pasta dinners and salads.