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Utility maximization

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A consumer buys five new college textbooks during his first year at school at a cost of $80 each. Used books cost only $50 each. When the bookstore announces that there will be a 10% increase in the price of new books and a 5% increase in the price of used books, the consumer's father offers him $40 extra. Is this consumer worse or better off after the price change? Explain.

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Solution Preview

Your original question is a little vague but I interpret it to mean that:

In the original scenario the student buys books at $80 and after the price increase buys them for $88 each.

If he is only buying the ...

Solution Summary

Utility maximization is evaluated.

$2.19