suppose valerie is consuming lipstick (l) and eye shadow (e) and nothing else. mul = 24 and mue = 40. the…

suppose valerie is consuming lipstick (l) and eye shadow (e) and nothing else. mul = 24 and mue = 40. the price of eye shadow is $5, and the price of lipstick is $4. what should valerie do? not change her consumption of either good. consume more lipstick and less eye shadow. consume more eye shadow and less lipstick. consume less of both. consume more of both.

suppose valerie is consuming lipstick (l) and eye shadow (e) and nothing else. mul = 24 and mue = 40. the price of eye shadow is $5, and the price of lipstick is $4. what should valerie do? not change her consumption of either good. consume more lipstick and less eye shadow. consume more eye shadow and less lipstick. consume less of both. consume more of both.

Answer

Explanation:

Step1: Calculate marginal - utility per dollar for lipstick

The formula for marginal - utility per dollar is $\frac{MUL}{P_L}$. Given $MUL = 24$ and $P_L=4$, then $\frac{MUL}{P_L}=\frac{24}{4}=6$.

Step2: Calculate marginal - utility per dollar for eye shadow

The formula for marginal - utility per dollar is $\frac{MUE}{P_E}$. Given $MUE = 40$ and $P_E = 5$, then $\frac{MUE}{P_E}=\frac{40}{5}=8$.

Step3: Compare marginal - utility per dollar

Since $\frac{MUE}{P_E}=8$ and $\frac{MUL}{P_L}=6$, and $\frac{MUE}{P_E}>\frac{MUL}{P_L}$, Valerie should consume more of the good with the higher marginal - utility per dollar (eye shadow) and less of the good with the lower marginal - utility per dollar (lipstick).

Answer:

Consume more eye shadow and less lipstick.