Kylie spends her income of $150 per week on two goods: movies (which cost $5 each) and books (which cost $10 each)
At her current level of consumption, the marginal utility from the last movie consumed is 20 and the marginal utility from the last book consumed is 30 . Is Kylie maximizing her utility? Why or why not? If not, what should Kylie do to achieve a higher level of utility?
No, she is not maximizing utility. She should be consuming such that the marginal utility per dollar spent on movies is equal to the marginal utility per dollar spent on books. In this case, the marginal utility per dollar spent on movies is higher. Therefore, she should increase her consumption of movies and lower her consumption of books.
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