Asked by
Anthony Soriano
on Dec 01, 2024
Verified
Charlie consumes apples and bananas; his utility function is U(a, b) = ab.Charlie's fruit farm yielded 5 apples and 10 bananas.In addition, Charlie has $10 that he was given by a secret admirer.Charlie can buy or sell apples at $2 each and he can buy or sell bananas at $1 each.Charlie will consume
A) more apples and more bananas than he grows
B) more apples and fewer bananas than he grows
C) fewer apples and more bananas than he grows
D) fewer apples and more bananas than he grows.
E) exactly as many apples as he grows and more bananas than he grows.
Utility Function
A mathematical representation used in economics to model the preference satisfaction or happiness that a consumer derives from consuming goods and services.
Fruit Farm
An agricultural establishment primarily engaged in the cultivation of fruit-bearing trees, bushes, and plants.
Secret Admirer
A person who has romantic feelings for someone else but keeps these feelings secret, often sending anonymous gifts or messages.
- Fathom the notion of endowments and the effect that alterations in prices have on selecting consumption options.
- Discuss the role of substitution and income effects on consumption choices following price changes.
Verified Answer
CM
Learning Objectives
- Fathom the notion of endowments and the effect that alterations in prices have on selecting consumption options.
- Discuss the role of substitution and income effects on consumption choices following price changes.