Maylin goes to her local sporting goods store to buy socks and jogging shorts. Socks cost $10 per pair and jogging shorts cost $15 each. At her current consumption bundle pair of 4 pairs of socks and 2 jogging shorts, her marginal benefit from the last pair of socks is 20 and the marginal benefit of the last jogging short is 30. Maylin should ________.

In case of two goods, consumer is at equilibrium when marginal utility per dollar spent on last unit of the goods are equal, ie MU 1 / P1 = MU 2 / P2 (MU are the marginal utilities / marginal benefit of two goods, P are the price of two goods)

Given : MU1 (So) = 20, MU2 (JSh) = 30, P1 (So) = 10, P2 (JSh) = 15

So, equilibrium is at where MU1 (So) / P1 (So) = MU2 (JSh) / P2 (Jsh)

20/10 = 2, & 30/15 = 2. MU's per dollar are equal for both.

So Maylin is in equilibrium, she should purchase one unit of each socks & jogging shorts.

ogorwyne ogorwyne · Answer 2 · 2021-11-25T10:20:10+01:00

The consumption schedule for Maylin is given as

4 pairs of socks at $10 per pair

2 jogging shorts at $15 per short

Marginal benefit from socks = MUs = 20

Marginal benefit from socks = MUj = 30

To maximize utility. The necessary condition =

[tex]\frac{MUs}{Ps} =\frac{MUj}{Pj} \\\\\frac{20}{10} =\frac{30}{15}[/tex]

2 = 2

The condition is fulfilled because the utility maximization is met.

Therefore Maylin should leave her consumption bundle unchanged.

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