How much will pauls mother will increase his lunch allowance

Reference no: EM13188263

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

utility = U(t,s) = sqrt{ts}

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

B) If the school tries to discourage 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 received in part (A)?

Reference no: EM13188263

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