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