Question

Maria has two budget constraints where she can trade off shoes and rice. The first budget constraint has two opportunity sets, 5 shoes and 0 pounds of rice, and 0 shoes and 20 pounds of rice. The second budget constraint has two opportunity sets of 5 shoes and 20 pounds of rice, and 9 shoes and 4 pounds of rice. If you compare opportunity set 5 shoes and 0 pounds of rice with 5 shoes and 20 pounds of rice, in which opportunity set Maria has greater utility?

Answer 1

Ans. If Maria choses the set with 5 shoes and 20 pounds of rice over the other set of 5 shoes and 0 pounds of rice then she will be better off because preferences are monotonic i.e. if the quantity of goods consumed increases then the utility increases. So, in the former set where consumption of shoes is same as the latter set gives an opportunity to comsume more rice increasing the overall utility.

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