1040

140/40 = 3.5

120

900

220/40 = 5.5

680

300/40 =7.5

380

380/40 = 9.5

0

-

-

1.5/$0.05

= 30

3.5/$0.05

= 70

5.5/$0.05

= 110

7.5/$0.05

= 150

9.5/$0.05

= 190

0

1

2

3

4

5

Start at the bottom of the table where the combination of round trips and phone minutes is (5, 0). This
starting point is arbitrary, but the numbers in this example work best starting from the bottom. Suppose

we consider moving to the next point up. At (4, 40), the marginal utility per dollar spent on a round trip is

25. The marginal utility per dollar spent on phone minutes is 190.

Since 25 < 190, we are getting much more utility per dollar spent on phone minutes, so let’s choose more
of those. At (3, 80), MU/PRT is 30 < 150 (the MU/PM), but notice that the difference is narrowing. We keep
trading round trips for phone minutes until we get to (1, 160), which is the best we can do. The MU/P
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