Economists refer to consumer satisfaction as utility and use \"utils\" to measur

Question

Economists refer to consumer satisfaction as utility and use "utils" to measure consumer utility. Jill enjoys cookies and milk as a snack. Below is a table showing Jill's utility from consuming cookies and milk: Total Utility (Utils) 0, 1, 2, 3, 4 # Cookies 0,300,500,600,650 Utils 0,1,2,3,4 # Milk: 0,600,700,720,730 If a cookie costs $1 and a glass of milk is $1, what combination of cookies and milk will provide Jill with the greatest total utility if she has $5 to expend? Now suppose that a cookie costs $1 and a glass of milk costs $2. Is Jill in consumer equilibrium if she consumes one cookie and one glass of milk? Please explain how you arrived at your answer.

Explanation / Answer

a) objective is to maximize total utility possible combinations 300+730 = 1030 500+720 = 1220 600+700 = 1300 650+600 = 1250 so in order to maximize total utility 2 glass of milk and 3 cookies b)no Jill isnt in consumer equilibrium because since the price of milk has doubles the utility he gets from 1 additional unit of milk has become half of what it was previously..so he would reduce the quantity of milk to less than one as the marginal utility is less

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