Answer to Question #210234 in Microeconomics for june

Question

1.     How should Mario allocate his Php 50 between his choices of eggs and sardines in order to attain the highest level of satisfaction?

Answer 1

The total amount of money is Php 50 which would result in the total expenditure on the goods given the maximum utility would be achieved by the consumer. The choice between the eggs and the sardines as both are normal goods would result in the consumer on the highest indifference curve when the consumer divides total money equally into eggs and sardines. 

The average are preferred than extremes as a result the consumer would spent equal money to eggs and sardines which would result in equal amount of goods if the prices would be equal. Thus, the consumer would allocate Php 25 to consumption of eggs and Php 25 to consumption of sardines which would maximization the utility and result in the consumer to be on the highest indifference curve and satisfaction.