Maximizing Happiness with Coke and Hot Dogs

Explanation:

Marginal utility is a term used to describe the economic situation that drives the relationship, in economic terms, between the availability of a product and the amount paid for it. According to the law of marginal utility, the lower the availability of a product, the greater the monetary value invested by it.

An example of this can be seen in the question above, where Gonzo has a limited budget to compare coke and hot dogs, which are the only things he consumes for his happiness. Since Gonzo has a limited budget, the availability of both coke and hot dogs decreases (as they have the same marginal utility).

Therefore, in a situation where the prices of coke and hot dogs are fixed, Gonzo should purchase coke and hot dogs in such a way that the addition to his happiness per dollar spent on coke is equal to the addition to happiness per dollar spent on hot dogs. This strategy allows him to maximize his happiness with the limited budget he has for purchasing coke and hot dogs.