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Utility maximizing choice

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If Fred is on a set salary and can only eat ham and drink tea. He drinks 4 bottles of tea and eats 10 lbs of ham. The price of tea is $10 per bottle and $4 per lb of ham. The last bottle of tea added 50 units to Fred's utility and the last lb of ham added 40 units. Would you consider that Fred was making a utility-maximizing choice and if so why or why not? If not, what should he do and why?

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Solution Summary

The utility maximization condition is determined.

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The utility maximization condition is that: MUx/MUy = Px/Py
MUx/MUy = 50/40 = 1.25
Px/Py = 10/4 = ...

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