Suppose the marginal value of bread in terms of wine is 1/2 bottle of wine per loaf of bread, while the relative price of bread in terms of wine is 1/4 bottle of wine per loaf of bread. Explain how the consumer can adjust his purchases to raise his level of satisfaction.
What will be an ideal response?
The marginal value indicates that the consumer is willing to pay up to 1/2 bottle of wine in exchange for 1 loaf of bread. Under the given market prices, the consumer has to sacrifice only 1/4 bottle of wine to purchase 1 loaf of bread, so this opportunity is a good deal for the consumer. The consumer's satisfaction level will increase if he buys less wine and more bread, because the value he places on additional bread is greater than the price he must pay in the market.
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