Joseph's utility function is given by x_A+ 2x_B, where x_Adenotes his consumption of apples and x_B his consumption of bananas. If a banana cost 50 cents and an apple costs also 50 cents, how many apples will he buy if his income is $10? A)20 B)10 C)0 D)5

Question

Quizplus · Accepted Answer

Joseph will maximize his utility by spending all his income on bananas, as they provide more utility per unit cost (2 utility per 50 cents) compared to apples (1 utility per 50 cents). Thus, he will buy 20 bananas and 0 apples.

Joseph's Utility Function Is Given by XA + 2xB, Where

Joseph's Utility Function Is Given by X_A+ 2x_B, Where