00:02
Hello, in order to maximize utility, we need to use the rule where marginal utility from, let's say, good a over the price of this good should be equal to the ratio of marginal utility of good b over the price of this good b.
00:28
So, the marginal utility per dollar, per one dollar should be equal for both goods.
00:36
But here it's given that this consumer already spent all his income on popcorn and candy at a movie and it's given that the marginal utility per dollar of the last candy, see, per dollar, per the price of this candy is less than the marginal utility per dollar of the popcorn over the price of popcorn.
01:14
So this rule, utility maximizing rule doesn't work.
01:21
We need to either increase the marginal utility of the last candy or decrease to decrease the marginal utility of popcorn.
01:32
But it's given that this consumer already spent his income he cannot buy more goods so what do we have here this means we need to make them equal and since we know that marginal utility is diminishing so marginal utility and quantity it decreases if we buy and consume more goods the marginal utility of the next consumed item will be less than for the previous one.
02:18
So we have diminishing marginal utility.
02:23
So this means that we need to decrease the number or the quantity of candies.
02:34
If we decrease, let me show this.
02:37
If we decrease, let's say from here to here, the marginal utility will increase.
02:48
And in the case of candy, we need to increase the marginal utility of candy.
02:53
So we need to consume less candy...