Question

he following table shows​ William's utility from consuming slices of

pizzapizza

and cans of

CokeCoke.

Slices of PizzaPizza	Total Utility from PizzaPizza	Marginal Utility from Last Slice	Cans of CokeCoke	Total Utility from CokeCoke	Marginal Utility from Last Can
0	0	​-	0	​-	​-
1	36	36	1	30	30
2	66	30	2	55	25
3	90	24	3	75	20
4	108	18	4	90	15
5	120	12	5	100	10
6	126	6	6	105	5

Suppose William has

​$3.30

per week to spend on

pizzapizza

and

CokeCoke.

The price of a slice of

pizzapizza

is

​$0.60

and the price of a can of

CokeCoke

is

​$0.50

If William wants to maximize his​ utility, he should buy

how many

​slice(s) of

pizza?

and

how many

​can(s) of

Coke?

Answer 1

Budget = 3.3

Price of pizza = 0.6

Price of coke = 0.5

We need to find marginal utility per dollar for pizza and coke

Marginal utility per dollar = Marginal utility/price

Quantity	Total utility from Pizza	Marginal utility from Pizza	Marginal utility per dollar from Pizza (p=0.6)	Total utility from Coke	Marginal utility from Coke	Marginal utility per dollar from Coke (p=0.5)
0	0	0	0	0	0	0
1	36	36	60.00	30	30	60.00
2	66	30	50.00	55	25	50.00
3	90	24	40.00	75	20	40.00
4	108	18	30.00	90	15	30.00
5	120	12	20.00	100	10	20.00
6	126	6	10.00	105	5	10.00

Selection of items would be in order of their decreasing marginal utility per dollar. We will stop selecting items where budget get over

1. 1st slice of pizza, MU per dollar = 60, price = 0.6

2 .1st can of coke, MU per dollar = 60, price = 0.5

3. 2nd slice of pizza, MU per dollar = 50, price = 0.6

4. 2nd can of coke, MU per dollar = 50, price = 0.5

5. 3rd slice of pizza, MU per dollar = 40, price = 0.6

6. 3rd can of coke, MU per dollar = 40, price = 0.5

After the selection of 3 slices of pizza and 3 cans of coke, the budget will be over.

3* 0.6 + 3* 0.5 = 3.3

3 slices of pizza and 3 cans of coke will be selected