Question

Suppose Joe is maximizing total utility within his budget constraint. If the price of the last pair of jeans purchased is​ $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is​ $20, then, using the rule of equal marginal utility per dollar​ spent. How much the extra satisfaction must Joe received from the last shirt?

Answer 1

Answer: the correct answer is 80 units of utility

Explanation:

Using the rule of equal marginal utility (using a simple rule of three)

$25    100 units of utility

$20      X                              X= (20*100)/25

                                             X= 2000/25

                                              X= 80 units of utility