| Money: | $100 | |
| Utility: | 0 | |
| Bread: | 0 | |
| Wine: | 0 |
Both bread and wine cost $1. But the pleasure obtained from each may differ, as modeled by
You are unaware of the values of alpha. But notice how wine gives a big utility boost, but it quickly reaches diminishing returns. To reach utility=1, you must balance your consumption.