Lily wants to maximize her benefit of consuming apples and bananas,given her fixed budget of $10 for these two fruits.The price of an apple is $1,and the price of a banana is $0.50.In order to derive Lily's demand curve for bananas,we need to ________.
A) solve the buyer's problem for her once, and find the optimal number of bananas, when price of a bananas is $0.50
B) solve the buyer's problem for her multiple times and find the optimal number of bananas, when price of a bananas is at a different level each time
C) draw a downward sloping line with slope of -1
D) draw a downward sloping line with slope of -2

Question

Quizplus · Accepted Answer

To derive Lily's demand curve for bananas, we need to solve the buyer's problem for her multiple times at different price levels of bananas. This will allow us to see the relationship between the price of a banana and the quantity demanded by Lily. Option A does not give us enough information at different price levels to derive the demand curve. Option C and D do not represent the correct slopes for a demand curve.

Lily Wants to Maximize Her Benefit of Consuming Apples and Bananas,given