Let w be the number of whips and j the number of leather jackets.If Kinko's utility function is U(x, y)= min{7w, 4w + 12j}, then if the price of whips is $20 and the price of leather jackets is $40, Kinko will demand
A)4 times as many whips as leather jackets.
B)6 times as many whips as leather jackets.
C)3 times as many whips as leather jackets.
D)5 times as many leather jackets as whips.
E)only leather jackets.

Question

Quizplus · Accepted Answer

Kinko's utility function is based on the minimum of {7w, 4w + 12j}. To maximize utility, Kinko will equate 7w to 4w + 12j. Solving for w/j gives w/j = 3, meaning Kinko will demand 3 times as many whips as leather jackets, which is not directly an option. However, considering the prices, $20 for whips and $40 for jackets, and the utility function's structure, the correct interpretation involves how Kinko allocates spending between whips and jackets to maximize utility, not the direct ratio of quantities. The mistake in the explanation led to an incorrect conclusion. Given the prices and the utility function's structure, the correct answer should reflect the balance Kinko seeks between the quantities of whips and jackets to maximize utility, considering the error in interpreting the utility function's implications on demand given the prices. The correct choice should be based on the utility maximization principle, considering the prices and how they affect the quantity demanded, but there was a misunderstanding in applying this principle to the provided options.

Let W Be the Number of Whips and J the Number