Suppose a caffeine-deprived man needs to wake up.Suppose his preferences can be described by $U = 3 \text { Coffee } + 2 \mathrm { Tea }$ .If the price of coffee is $4 and the price of tea is $1,he will buy
A)all coffee.
B)all tea.
C)some of both,but more coffee.
D)some of both,but more tea.

Question

Quizplus · Accepted Answer

Given the utility function $U = 3 \text{ Coffee } + 2 \text{ Tea }$ and the prices for coffee ($4) and tea ($1), the man will maximize his utility by purchasing all tea. This is because the utility per dollar spent on tea (2 units of utility per $1) is higher than the utility per dollar spent on coffee (0.75 units of utility per $1), making tea the more cost-effective choice for maximizing utility.

Suppose a Caffeine-Deprived Man Needs to Wake Up U=3 Coffee +2TeaU = 3 \text { Coffee } + 2 \mathrm { Tea }U=3 Coffee +2Tea

Suppose a Caffeine-Deprived Man Needs to Wake Up $U = 3 \text { Coffee } + 2 \mathrm { Tea }$