Question

A shopper has $8 to spend. The shopper can buy fractions or decimals of the goods. Answer the following questions in a textbox. You do not have to show your work. Simply write the question number and its associated answer.

	Candy - $4 a bag	Milk - $2 a carton	Eggs - $0.25 a carton
1st bag or carton	40 utils	30 utils	10 utils
2nd bag or carton	36 utils	24 utils	5 utils
3rd bag or carton	16 utils	18 utils	2 utils

1. How many bags of candy will this person buy?
2. How many cartons of milk will they buy?
3. How many cartons of eggs will they buy?

Answer 1

The person is available with $8 and he has three choices; candy, milk, eggs.
For the first bag, he is getting more utility in candy (40 utils) than milk and egg. Hence he will have 1 bag candy.
A bag of candy cost $4, hence the person is left with $4.
Now the second bag of candy again gives him greater utility (36 utils) that milk and egg. Hence he will again buy a bag of candy. And the available budget is exhausted.

Hence the person will have 2 bag candy and no egg and milk.