Question

Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $4. The consumer’s optimal choice is point (Hint: Solve using the budget constraint formula)

Figure 21-19 Quantity of M&Ms 10 8 7 6 B 5 4 11 3 2 1 o 2 3 4 5 6 7 8 9 10 Quantity of Skittles

  • A. A
  • B. B
  • C. C
  • D. D
0 0
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Answer #1

Answer - Option A

Point A

The optimal choice of consumption will be point A. This is because at this point (2*4+4*3) makes up $ 20 which is exact as per the budget constriant of $ 20 which is not being met at point B.

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