The Analysis of Consumer Choice

Read the Introduction and these two sections. Attempt the "Try It" problems at the end of each section. Take a moment to read through the stated learning outcomes for this chapter of the text, which you can find at the beginning of each section. These outcomes should be your goals as you read through the chapter.

2. The Concept of Utility

2.5. Try It!

A college student, Ramón Juárez, often purchases candy bars or bags of potato chips between classes; he tries to limit his spending on these snacks to $8 per week. A bag of chips costs $0.75 and a candy bar costs $0.50 from the vending machines on campus. He has been purchasing an average of 6 bags of chips and 7 candy bars each week. Mr. Juárez is a careful maximizer of utility, and he estimates that the marginal utility of an additional bag of chips during a week is 6. In your answers use B to denote candy bars and C to denote potato chips.

  1. How much is he spending on snacks? How does this amount compare to his budget constraint?
  2. What is the marginal utility of an additional candy bar during the week?