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
A surplus of loanable funds will result if the: Economists use _____ as a model to explain how savers and borrowers come together to determine the equilibrium rate of interest
The correlation between operating income rank and season win percentage rank in 2014 for MLB franchises was 0.0002. This suggests that there is no relation between team per
What is the future worth of $1000 in month 1, $1040 in month 2, and amounts increasing by $40 per month through month 12, at the end of year two if the interest rate is 23.763
Evaluate the federal fiscal policy and monetary policy in terms of the Austrian approach to macroeconomics and the Structuralist Keynesians. While preparing your answer, pay p
Show your math to receive credit: Suppose that you have just bought a four-year $10,000 coupon bond with a coupon rate of 7% when the market interest rate is 7%. Immediately a
Suppose a uniform price monopolist is choosing a price along a linear demand curve. If at thecurrent output the value of the Elasticity of Demand is -1.1 and Marginal Cost i
Illustrate a firm in monopolistic competition that does not make a profit but rather a loss. Now illustrate how firm exit will change demand in the long run, allowing at le
In order to engage in price discrimination, a monopolist has to be able to determine that there are different groups of consumers that have different ________ for the product.