Answer:
It can be concluded that total utility can be maximized by shifting consumption from pretzels to soda.
Explanation:
The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively.
The marginal utility of the last bottle of soda is 60 utils and the marginal utility of the last bag of pretzels is 30 utils.
Total utility will be maximized when the ratio of the marginal utility and price for both the goods is equal.
The ratio for soda
= [tex]\frac{60}{0.60}[/tex]
= 100
The ratio for pretzels
= [tex]\frac{30}{0.40}[/tex]
= 75
Since the ratio is greater for soda we can conclude that the total utility can be maximized if Arnold consumes more of pretzels and less of soda.
