Assume prices and budgeted dollars are unchangeable

Reference no: EM13698237

Assume that Bob is only purchasing two products G and W. The market price of G is $25 and of W is $20. By spending all of his budgeted amount on these two items, he is maximizing utility and receiving 100 utilities from the last unit of G and 80 utilities from the last unit of W.

a. Suppose that it takes 6 hours to consume a unit of product G, but only 3 hours to consume a unit of W. Bob can earn $10 per hour when working and when he is consuming G or W he is not able to work.

1) Determine the full price of each unit of G and of W.

2) Considering the full price of each of the two products, determine if Bob is maximizing utility and if not what can be done in terms of buying more or less of these two products. (Show work and assume prices and budgeted dollars are unchangeable.)

Reference no: EM13698237

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