Question

Patton is trying to decide between a cup of coffee and a glass of orange juice. The coffee costs $1 and yields 10 units of additional utility. The juice costs $2 and yields 22 units of additional utility. If Patton follows the principle of rational choice, he will buy:

Answer 1

Juice since it gives Patton the most marginal utility per dollar.

Step-by-step explanation:

According to the principle of rational choice consumers make purchasing decisions based on the utility they gain per unit dollar of the product.

They choose options that will most serve their self interest.

Rational calculations are done that shows the best option for the consumer.

In the given scenario we will calculate the utility per dollar of coffee and orange juice.

The one with higher utility will be chosen.

For coffee Utility per dollar = 10 ÷ 1 = 10

For juice Utility per dollar = 22 ÷ 2 = 11

Juice has more utility per dollar. So this is the rational option for the consumer.