Assume the price of a cup of coffee is $0.50, the price of a cupcake is...
Assume the price of a cup of coffee is $0.50, the price of a cupcake is $0.50 and the individual has a budget of $1.50. Assuming they maximize their utility, how many of each good will they purchase?
| Number of coffee cups | Total utility | Number of cupcakes | Total Utility | |
| 1 | 20 | 1 | 25 | |
| 2 | 35 | 2 | 45 | |
| 3 | 47 | 3 | 59 | |
| 4 | 57 | 4 | 65 | |
| 5 | 63 | 5 | 67 |
Question 15 options:
|
4 cups of coffee and 2 cupcakes |
|
|
1 cup of coffee and 2 cupcakes |
|
|
2 cups of coffee and 4 cupcakes |
|
|
answer not given |
|
|
5 cups of coffee and 4 cupcakes |
Homework Answers
Option 2
|
Number of coffee cups |
Marginal Utility of Coffee Cups |
Number of cupcakes |
Marginal Utility of cupcakes |
|
1 |
20 |
1 |
25 |
|
2 |
15 |
2 |
20 |
|
3 |
12 |
3 |
14 |
|
4 |
10 |
4 |
6 |
|
5 |
6 |
5 |
2 |
As the budget is $1.5 and price is $0.5 for both Coffee and Cupcakes, based on marginal utility we need to decide which needs to be bought.
Here, first 1 cupcake needs to be selected, then 1 coffee cup and again 1 cup of cupcake, which makes 2 cupcake and 1 coffee cup
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