Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Buy 2 units of A and 4 units of B.
B
Buy 5 units of A and 0 units of B.
C
Buy 1 unit of A and 8 units of B.
D
Buy 0 units of A and 10 units of B.
Understanding the Answer
Let's break down why this is correct
Answer
With a $50 budget, the consumer can buy at most five units of good A (5 × $10) or ten units of good B (10 × $5). To maximize satisfaction, the consumer should compare the utility each good provides per dollar; if the utility per dollar is the same for both goods, buying the cheaper good B gives twice as many units, so the consumer gets more goods for the same money. If the consumer values each unit of A more than a unit of B, they should buy as many A’s as possible until the budget is exhausted. For example, buying 3 A ($30) and 4 B ($20) uses the full $50 and yields 7 goods, which may be the best mix if A is slightly more valuable per unit.
Detailed Explanation
Buying one A for $10 uses part of the budget and leaves $40 for B, which costs only $5 each. Other options are incorrect because This plan spends only $40, leaving $10 unused, so it wastes money that could buy more B; All $50 is spent on A, giving only five units.
Key Concepts
Utility Maximization
Topic
Optimal Purchase Combinations
Difficulty
easy level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1A consumer has a budget of $100 and is considering two products: Product X, which provides 20 units of utility for $20, and Product Y, which provides 30 units of utility for $30. If the consumer wants to maximize their utility while accounting for opportunity cost, which product should they choose to purchase if they can only choose one?
hardEconomics
Practice
2
Question 2A consumer evaluates two items: Item A offers 50 units of satisfaction for $10, while Item B provides 80 units for $20. If the consumer has a budget of $30 and considers the opportunity cost, which item will yield the highest marginal utility per dollar spent?
mediumEconomics
Practice
3
Question 3In a scenario where a consumer faces a budget constraint of $60 to spend on goods X and Y, with good X priced at $12 and good Y at $4, how would an increase in the price of good X to $15 affect the consumer's optimal consumption choices, assuming their preferences are represented by indifference curves?
hardEconomics
Practice
4
Question 4If a consumer has a budget of $40 to spend on goods C and D, where good C is priced at $8 and good D at $4, which combination of goods would best optimize their utility?
easyEconomics
Practice
5
Question 5Consider a consumer with a monthly budget of $80 who wants to purchase two goods, X and Y. If good X costs $16 and good Y costs $8, which combination of these goods would yield the highest level of satisfaction while adhering to the budget constraint?
mediumEconomics
Practice
6
Question 6If a consumer has a budget of $7, how should they allocate their spending between apples and oranges to maximize their satisfaction?
easyEconomics
Practice
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.