1.Problem

i.The consumer side analogue to firm's goal of profit maximization is the goal of utility maximization subject to a budget constraint.Utility means satisfaction.So let's consider an individual who consumes only two goods: ale and bread.The quantity of ale is given in pints/week and the quantity of bread is given in loaves per week.Suppose the price of ale is $2/pint and the price of a loaf of bread is .50/load.

Let Income $8. The consumer's utility is given below.

Let

0000

140115

270223

390330

4100435

5105538

6107640.5

7108742

8108.5843

a.Which (Ale, Bread) bundle maximizes this consumer's utility given the

budget constraint

b.Does this bundle violate our "bang for the buck" rule for maximization?

Explain.