About the utility, Each day Paul, who is in third grade,

About the utility

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Reference no: EM13817314

Each day Paul, who is in third grade, eats lunch at school. He likes only twinikies (t) and soda (s), and these provide him a utility of

utility = U(t,s)=(ts)^1/2

a. If twinkies cost $0.10 each and soda costs $0.25 per cup, how should paul spend the $1 his mother gave him to maximize his utility?

b. If the school discourages twinkie consumption by increasing the price to $0.40, by how much will paul's mother have to increase his lunch allowance to provide him with the same level of utility he recieved in part (a.)?

Reference no: EM13817314

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