Question

Suppose an individual's marginal rate of substitution is three slices of

pizza for one beer at the present bundle of beer and pizza she is consuming. If

the price of beer is $1.00 and the price of a slice of pizza is $1.50, is the

consumer maximizing her welfare? If not, how should she change her

consumption?

Answer 1

If the price of beer is $1.00 and the price of a slice of pizza is $1.50, then the consumer is not maximizing her welfare, and should consume more beer and less pizza to maximize her welfare.