You Have $64 to Spend on Fish (F) and Chips

question 21

Essay

You have $64 to spend on fish (F) and chips (C). Suppose the price per unit of fish (Pf) is $8 and the price of chips (Pc) is $2. Your utility function for fish and chips is given asC. How many units of C and F should you buy to exhaust all income and maximize utility?
First note that to maximize utility, you have to be at equilibrium. This means, the following condition has to be satisfied:
It is better to write this as:
Now substitute the corresponding entities in the above expression:
Cancelling the 2s in the denominator and cross-multiplying we get
C = 4 F
Now the second aspect of this is your income which is $64, which has to be spent on F and C. So your budget constraint should satisfy this condition:
64 = C Pc + F Pf or
64 = C 2 + 8 F and now from the previous condition we have
64 = (4 F) 2 + 8 F or
F = 4 units
C = 16 units and total utility is

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Definitions:

Intrinsic Motivation

The drive to engage in an activity for its own sake, deriving pleasure and satisfaction from the activity itself rather than from external rewards.

Level of Interest

The degree of curiosity, attention, or concern an individual or group shows towards a subject or activity.

Internal State

An individual's mental or emotional condition at a specific time, influenced by various internal and external factors.

Effort Expended

The amount of physical or mental energy put into a task or activity.