Joe's demand for manna is independent of his income, and his demand function is p = $10 - x, where p is the price of manna and x is quantity demanded. Alph has a very large supply of manna, and Joe has asked Alph to propose a deal. Joe is the only person who places any value on manna. Which of the following deals is best for Alph? Caution-Joe must, of course, accept the deal.

Question

Quizplus · Accepted Answer

Given Joe's demand function p = $10 - x, the maximum price he is willing to pay decreases as he buys more units. At $5 per unit (option A), Joe would buy 5 units ($10 - $5 = $5), spending $25. For option B, the total cost for 5 units would be $50 + (5*$5) = $75, which is not optimal for Joe. At $8 per unit (option C), Joe would buy 2 units ($10 - $8 = $2), spending $16. Option D allows Joe to pay a lump sum of $45 for all the manna, which is the best deal for Alph since it guarantees a higher immediate payment than the other options, considering Joe's demand and the value he places on manna.

Joe's Demand for Manna Is Independent of His Income, and His