How much would she have needed to give paul in cash

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Reference no: EM13243770

Paul consumes only two goods, pizza (P) and hamburgers (H) andconsider them to be perfect substitutes, as shown by his utilityfunction: U(P,H) = P+4H. The price of pizza is $3 and the price ofhamburger is $6, and Paul's monthly income is $300. Knowingthat he likes pizza, Paul's grandmother gives him a BD giftcertificate of $60 redeemable only at Pizza Hut. Though Paul ishappy to get this gift, his grandmother did not realize that sheshould have made him exactly happy by spending less than she did.How much would she have needed to give him in cash to make him justas well off as with the gift certificate?

Reference no: EM13243770

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