Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 21 - Part VII - The Theory of Consumer Choice - Problems and Applications - Page 460: 13

Answer

Claire and Alex are optimizing their choices. Phil and Haley should purchase more apples (and fewer pears), while Luke should purchase more pears (and fewer apples).

Work Step by Step

The utility for each person is maximized when the marginal utility per dollar is the same between goods. In this case, a consumer is maximizing their utility when the marginal utility of a pear is twice as much as the marginal utility of an apple (to account for the price difference). Claire and Alex are maximizing utility as they have marginal utilities of 6 and 3 for apples (respectively) and 12 and 6 for pears (respectively). Phil and Haley get have a higher marginal utility per dollar for apples than pears, and Luke has a higher marginal utility per dollar for pears than apples. Thus, Phil, Haley, and Luke need to purchase more of the fruit where they get the most utility.
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