Suppose your classmate Sean loves to eat dessertso much so that he allocates his entire weekly budget
Question:
Suppose your classmate Sean loves to eat dessertso much so that he allocates his entire weekly budget to chocolate mousse and pie. The price of one bowl of chocolate mousse is $1.00, and the price of a piece of coconut crme pie is $3.00. At his current level of consumption, Sean's marginal rate of substitution (MRS) of chocolate mousse for pie is 1. In other words, Sean is willing to sacrifice one bowl of chocolate mousse for one piece of pie per week.
Does Sean's current consumption bundle maximize his utility? That is, does it make him as well off as possible? If not, how should he change it to maximize his utility?
Sean could increase his utility by buying less chocolate mousse and more pie per week.
Sean could increase his utility by buying more chocolate mousse and less pie per week.
Sean's current bundle maximizes his utility, and he should keep it unchanged.