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Donal has spent his lunch budget on two goods, Pizza and Cola at the White House Pizzaria. He has allocated his budget such that the
Donal has spent his lunch budget on two goods, Pizza and Cola at the White House Pizzaria. He has allocated his budget such that the marginal utility of Pizza is (MUp = 10) and Cola is (MUc=5), and the prices of Pizza is Pp= $3 and Colas is Pc= $1
a) Is he maximizing his utility? If not, explain how he should reallocate his purchases to maximize his utility ?
b) Using indifference curves and a budget line, illustrate the above allocation assuming he had spent $21.
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