Scenario 4.1:
Daniel derives utility from only two goods, cake (Qc) and donuts (Qd). The marginal utility that Daniel receives from cake (MUc) and donuts (MUd) are given as follows:
MUc = Qd MUd = Qc
Daniel has an income of $240 and the price of cake (Pc) and donuts (Pd) are both $3.
-See Scenario 4.1. What is Daniel's budget constraint?

Question

Quizplus · Accepted Answer

The budget constraint represents the total amount of money available to spend on goods, given their prices and the quantities purchased. Since Daniel has $240 to spend on cake and donuts, both priced at $3, the correct equation is 240 = 3Qc + 3Qd, where Qc and Qd are the quantities of cake and donuts, respectively.

Scenario 4.1: Daniel Derives Utility from Only Two Goods, Cake (Qc) and (Qc)