School tries to discourage twinkie consumption by raising, Ask an Expert

Economics

Q. 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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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9156704

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