Answer to Question #103380 in Microeconomics for supt

Question

Where did you get the 1.5 in the "marginal utility per dollar for the doughnut is greater than the marginal utility per dollar for the cup of coffee (11>1.5)"? Shouldn't it be 11 > 3.5?

Answer 1

This is because donuts have a higher marginal utility per dollar for the first nine purchases but at the tenth purchase the marginal utility per dollar for a donut is less than that of a coffee making him purchase a coffee