Question

The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility by purchasing lemonade and popcorn, his marginal rate of substitution will be:

Answer 1

2 lemonades for each popcorn will be the answer.

Utility maximization is the concept by which individuals and organizations seek to achieve the highest levels of satisfaction with their financial decisions. The utility function measures the intensity at which a person's achievements are achieved.

If a consumer wants to maximize total utility, for every dollar he spends, he should spend it on items that bring the maximum marginal utility per dollar spent.

When multiple products are selected, the condition for maximizing utility is for the consumer to balance marginal utility per pound. The utility maximization conditions are as follows: MUA / PA = MUB / PB Where MU is marginal utility and P is price.

Learn more about maximizing utility here:brainly.com/question/15829138

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