Differences in caffeine levels
Course:- Business Economics
Reference No.:- EM13149099

Assignment Help
Assignment Help >> Business Economics

Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS of tea for coffee equals 2. If coffee and tea sell for the same price, Johnny will a. spend all $30 on tea. a. spend all $30 on tea. b. spend all $30 on coffee. c. spend $20 on coffee and $10 on tea. d. be indifferent between any bundle of coffee and tea costing $30 Can someone explain why the answer is B? From my understanding, MRS = -U1 / U2 or dq2 / dq1 and I don't know how to apply that.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
The future of cities in the united states and in other countries will be determine by their abilities to benefit from the _____________ and to minimize or counterbalance the _
Society’s total surplus is maximized in perfectly competitive markets. Statement 2: In the long run, only perfectly competitive firms operate at the minimum of the average cos
Why, in a model with no production but two periods does an increase in current taxes (without a concurrent change in government spending) not affect consumption? Explain graph
The Wall Street Journal's experience after an increased its price to 75 cents. Illustrate what implicit  assumptions are the publisher and the analyst making about the price
Will it be easier for tax payers to pay off public debt if the money borrowed by the government is spent on education and public infrastructure, or if it is spent on unemploym
Illustrate what is the fed funds rate in the banking system. Explicates howthe Fed manipulates this rate in order to achieve macroeconomic objectives.
Illustrate what is micelles opportunity cost of producing potatoes and or chickens if she were to produce 200 pounds of potatoes per year and 50 chickens per year.
Suppose that some soybean farmers experience losses over a long period and therefore decide to exit the market. What effect will this exit have on the market supply of soybean