Question

Alex has bought 5 avocados, 2 tomatoes and 3 cucumbers. The prices are P a = 12, P t = 3 and P g = 5. Alex claims that he, at the margin, is willing to substitute 1 avocado for 2 cucumbers. At the same time, Alex claims to, at the margin, be able to substitute 1 tomato for 4 avocados. A. Given Alex’s first claim, that he is willing to substitute 1 avocado for 2 cucumbers, has Alex made the right choice? If not, how could he improve his consumption choice?

B. Illustrate Alex’s consumption choice (avocado and cucumbers) and the corresponding budget line in a figure.

C. Given Alex’s second claim, that he is willing to substitute 1 tomato for 4 avocados, has Alex made the right choice? If not, how could he improve his consumption choice?

D. Illustrate Alex’s consumption choice (tomatoes and avocados) and the corresponding budget line in a figure.

Answer 1

The detailed answer of the questions are given below.

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