Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
3 units of C and 2 units of D
B
2 units of C and 5 units of D
C
4 units of C and 1 unit of D
D
5 units of C and 0 units of D
Understanding the Answer
Let's break down why this is correct
Answer
With a $40 budget, you can spend it entirely on one type of good or mix them, but the goal is to get the most utility. If we assume each unit of C or D gives the same satisfaction, you want the greatest number of units, so you choose the cheaper good. Good D costs $4, so you can buy 10 units for $40, while good C costs $8, giving only 5 units. Because 10 units of D give twice as many items as 5 units of C, you get more overall utility. Thus, buying 10 units of good D maximizes utility under this budget.
Detailed Explanation
The pair of 2 C and 5 D costs $36, which fits under the $40 budget. Other options are incorrect because Buying 3 C and 2 D uses less money than it could and leaves the cheaper good too few; Choosing 4 C and 1 D spends the same $36 but spends all of it on the pricier item.
Key Concepts
Optimal Consumption Bundle
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 2If a consumer has a budget of $50 and prefers to buy two goods, A and B, how can they maximize their satisfaction given that good A costs $10 and good B costs $5?
easyEconomics
Practice
3
Question 3Consider 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
4
Question 4If a consumer is maximizing utility with a budget of $20, which combination of apples and oranges maximizes total utility given the marginal utilities and prices?
mediumEconomics
Practice
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