Grace consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle. Her income is $500 per month. Grace spends all her income each month. She purchases 50 bottles of iced tea and 100 servings of spaghetti. What is the price of a serving of spaghetti?

Question

Quizplus · Accepted Answer

The total amount Grace spends on iced tea is 50 * $2 = $100. Therefore, she spends $500 - $100 = $400 on spaghetti. Since she purchases 100 servings of spaghetti, the price of a serving of spaghetti is $400 / 100 = $4.

Grace Consumes Two Goods: Iced Tea and Spaghetti