Graph 22-8

-Refer to Graph 22-8. Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5. The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?
A) bundle A
B) bundle B
C) bundle C
D) bundle D

Question

Graph 22-8
 
-Refer to Graph 22-8. Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5. The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?
A) bundle A 
B) bundle B 
C) bundle C 
D) bundle D

Quizplus · Accepted Answer

The consumer's budget constraint is $50. At the prices given, the consumer can purchase 20 marshmallows ($50/$2.50) or 10 chocolate chips ($50/$5) if they spend all their income on one good. The optimal bundle is where the budget line is tangent to the highest possible indifference curve, which is typically represented by bundle B in such graphs.

Graph 22-8 -Refer to Graph 22-8. Assume That the Consumer Depicted in the Consumer