Assignment: Maximizing Utility of Pizzas and Twinkies

Suppose that as a consumer you have $34 per month to spend for munchies, either on pizzas which cost $6 each or on Twinkies which cost $4 each. Suppose further that your preferences are given by the following total utility table.

Count

1 2 3 4 5 6 7
Pizzas 60 108 138 156 162 166 166
Twinkies 44 76 100 120 136 148 152

First, graph the budget constraint with Pizzas on the horizontal axis and Twinkies on the vertical axis. What are the intercepts and slope of the opportunity cost? Express the budget constraint as an algebraic equation for a line.

Next, use the utility maximizing rule to identify the consumer equilibrium, that is, what combination of Twinkies and Pizzas will maximize your total utility. Confirm that the consumer equilibrium generates the highest combined total utility of any affordable combination of goods.

Rubric

Criteria Not Evident Developing Proficient Distinguished Weight
Accurately graphs the budget constraint 5
Correctly identifies the intercepts 1
Expressed the budget constraint as an algebraic equation for a line 2
Graph the slope as the opportunity cost 2
Calculate the consumer equilibrium using the utility maximizing rule 4
Explain the process used to confirm that the consumer equilibrium generated the highest combined total utility of any affordable combination of goods 5
Articulation of response (citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas.) 1
Total: 20