Question: 7 . MRS and utility maximization Suppose your classmate Frances loves to eat dessert so much so that she allocates her entire weekly budget to
MRS and utility maximization
Suppose your classmate Frances loves to eat dessertso much so that she allocates her entire weekly budget to chocolate mousse and pie. The price of one bowl of chocolate mousse is $ and the price of a piece of rhubarb pie is $ At her current level of consumption, Frances's marginal rate of substitution MRS of chocolate mousse for pie is In other words, Frances is willing to sacrifice five bowls of chocolate mousse for one piece of pie per week.
Does Frances's current consumption bundle maximize her utility? That is does it make her as well off as possible? If not, how should she change it to maximize her utility?
Frances could increase her utility by buying more chocolate mousse and less pie per week.
Frances could increase her utility by buying less chocolate mousse and more pie per week.
Frances's current bundle maximizes her utility, and she should keep it unchanged.
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