If a donut shop runs a special and sells a dozen donuts for $3.00, Tarik buys a dozen donuts each week. If donuts are not on special and the price is $6.00 per dozen, Tarik buys no donuts each week. Which of the following is true?
A) Tarik's demand for donuts is inelastic.
B) Tarik's utility from a dozen donuts is less than $3.00.
C) The value of Tarik's utility from a dozen donuts is at least $3.00 and less than $6.00.
D) Tarik's utility from a dozen donuts is greater than $6.00.

Question

Quizplus · Accepted Answer

Tarik buys donuts when they are $3.00, indicating he values them at least that much, but does not buy them at $6.00, suggesting his valuation is below that price. This behavior shows his utility value for a dozen donuts falls between these two prices.

If a Donut Shop Runs a Special and Sells a Dozen