A consumer has a budget of $200 to spend on bowling (b) and tutoring sessions (t). Assume that each game of bowling costs $16 and each tutoring session costs $20.
The consumer derives utility from tutoring sessions and bowling according to the utility function U(b,t)
. The consumers marginal utility from each game of bowling is MUb=t and the marginal utility of each tutoring session is MUt=b+1
. What is the consumers marginal rate of substitution?
and then the optimal consumption bundle.