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17 July, 18:27

Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ari consuming the correct quantities of these two goods to be in consumer equilibrium?

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  1. 17 July, 19:53
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    Yes, there is no need to change the eatings habits

    Explanation:

    Ari will maximize utility until

    MU / P for both is equal in order to be at equilibrium

    So, in this case,

    For Hot dogs

    = MU / P

    where

    MU is marginal utils, which is 20

    P is Price, which is $2

    So,

    = 20 / $2

    = 10

    For Hamburgers

    = MU / P

    where

    MU is marginal utils, which is 25

    P is Price, which is $2.5

    So,

    = 25 / $2.5

    = 10

    Therefore, MU / P for hot dog = MU / P for Hamburger

    Hence, there is not need to change the eatings habits.
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