Helen can spend a combined total of $30 each day on these

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1. Dave currently consumes 10 hot dogs and 6 sodas each week. At his current consumption basket, his marginal utility for hot dogs is 5 and his marginal utility for sodas is 3. If the price of one hot dog is $1 and the price of one soda is $0.50, is Dave currently maximizing his utility? If not, how should he reallocate his spending in order to increase his utility?

2. Helen’s preferences over CDs (C) and sandwiches (S) are given by U(S, C) = SC +10(S +C), with MUC=S +10 and MUS= C +10. If the price of a CD is $9 and the price of a sandwich is $3, and Helen can spend a combined total of $30 each day on these goods, find Helen’s optimal consumption basket.

Reference no: EM13340055

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