A consumer buys Bread (B) and Milk (M) each week at prices of Rs. 10 and Rs. 8 respectively. Suppose that the consumer's current consumption of Bread and Milk is giving him MUBrend = 80 and MUMia = 70. Is the consumer buying the utility-maximizing combination of bread and milk? If not, how should he reallocate his expenditures between the two goods to maximize utility? Draw diagram and explain.

Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
Publisher:BOYES, William
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 8E
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A consumer buys Bread (B) and Milk (M) each week at prices of Rs. 10 and Rs. 8 respectively. Suppose
that the consumer's current consumption of Bread and Milk is giving him MUBrend = 80 and MUMia = 70.
Is the consumer buying the utility-maximizing combination of bread and milk? If not, how should he
reallocate his expenditures between the two goods to maximize utility? Draw diagram and explain.
Transcribed Image Text:A consumer buys Bread (B) and Milk (M) each week at prices of Rs. 10 and Rs. 8 respectively. Suppose that the consumer's current consumption of Bread and Milk is giving him MUBrend = 80 and MUMia = 70. Is the consumer buying the utility-maximizing combination of bread and milk? If not, how should he reallocate his expenditures between the two goods to maximize utility? Draw diagram and explain.
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