If twinkies cost .10 each and soda cost .25 per cup how, Ask an Expert

Economics

Each day Matt eats lunch at school. He likes only Twinkies (t) and soda (s), and these provide him a utility of
Utility = U(t,s) = ts; with MUt = s and MUs = t

a) If Twinkies cost $.10 each and soda cost $.25 per cup, how should Matt spend the $1 his mother gives him in order to maximize his utility?

b) If the school tries to discourage Twinkie consumption by raising the price to $.40, by how much will Matt's mother have to increase his lunch allowance to provide him with the same level of utility he received in part (a)?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M941062

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