Assume you are going to lunch and have a choice of two meals. The first meal would give an increase in marginal utility of 100 with a $25 price. The second meal would give you an increase of only 10 with a $2 price. The third meal will give you an increase of 50 with a $5 price. Which meal should you logically choose?

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29 September, 04:00

Assume you are going to lunch and have a choice of two meals. The first meal would give an increase in marginal utility of 100 with a $25 price. The second meal would give you an increase of only 10 with a $2 price. The third meal will give you an increase of 50 with a $5 price. Which meal should you logically choose?

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Answers (1)

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Reagan Bradshaw · Answer 1

Meal 3 = 50 utils / $5 = 10 utils per dollar spent

Explanation:

Logically, the meal with highest utility per Dollar spent would be the priority for me. So here:

Meal 1 = 100 utils / $25 = 4 utils per dollar spent

Meal 2 = 10 utils / $2 = 5 utils per dollar spent

Meal 3 = 50 utils / $5 = 10 utils per dollar spent

As meal 3 has highest utility per dollar spent, it will generate higher value for me. So I will opt meal 3.