Suppose a person has $104 a month to spend on eating at high-end restaurants (HE), casual dining (CD) restaurants such as California Pizza Kitchen and T.G.I. Fridays, and fast food (FF) restaurants. Going to the high-end restaurants costs $32 each time, while the casual dining restaurants costs $16 each time and the fast food restaurants $8.
a. Suppose the table below shows the total utility associated with each level of consumption of the three products:
Use the table to calculate the MU and MU / P for each possible quantity.
b. What is the utility maximizing combination of going to high end, casual dining, and fast food restaurants for this consumer? Show that the condition for utility maximization is met.