Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), andthese provide him a utility ofutility = U (t s) =square root (ts).a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 hismother gives him in order to maximize his utility?b. If the school tries to discourage Twinkie consumption by raising the price to $0.40, by howmuch will Paul’s mother have to increase his lunch allowance to provide him with the same levelof utility he received in part (a)?
Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), andthese provide him a utility ofutility = U (t s) =square root (ts).a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 hismother gives him in order to maximize his utility?b. If the school tries to discourage Twinkie consumption by raising the price to $0.40, by howmuch will Paul’s mother have to increase his lunch allowance to provide him with the same levelof utility he received in part (a)?
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.1P
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Each day Paul, who is in third grade, eats lunch at school. He likes only Twinkies (t) and soda (s), and
these provide him a utility of
utility = U (t s) =square root (ts).
a. If Twinkies cost $0.10 each and soda costs $0.25 per cup, how should Paul spend the $1 his
mother gives him in order to maximize his utility?
b. If the school tries to discourage Twinkie consumption by raising the
much will Paul’s mother have to increase his lunch allowance to provide him with the same level
of utility he received in part (a)?
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