Bridget has a limited income and consumes only wine and cheese, her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of the wine is $10 per bottle, and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units.
a. Is Bridget making the utility-maximizing choice? Why or why not?
b. If not, what should she do instead? Why?
For the wine, the marginal utility is 50 units and the price is $10
Therefore, marginal utility per price = 50/10 = 5
For the cheese, the marginal utility is 40 units and the price is $4
Therefore, marginal utility ...
This solution provides calculations for marginal utility and discusses maximizing utility and what Bridget should do for optimal consumption.