Consumer Choice That Fails to Maximize Utility


A consumer has an income of $24 per week and buys two goods in quantities measured by x and y. Initially he faces prices (Px, Py) = ($4, $2) and chooses basket A containing (x1, y1) = (5, 2). Later the prices change to He then chooses (Px,Py) =($3, $3).He then choose sbasket B, containing (x2, y2) = (2, 6). These choices and his budget lines are illustrated. Show that the cannot be choosing baskets that maximize his utility in both periods.


"Get 15% discount on your first 3 orders with us"
Use the following coupon

Order Now