Scenario: Maylin is shopping at the sporting goods store for socks and running shoes. She has determined the following total benefit derived from each quantity of socks and running shoe

-Now suppose the price of running shorts doubles to $20,socks remain priced at $10 per pair,and Maylin has $150 of income.What consumption bundle maximizes Maylin's total benefit at the new,higher price of running shorts?
A) 5 pairs of socks and 5 running shorts
B) 4 pairs of socks and 4 running shorts
C) 3 pairs of socks and 3 running shorts
D) 2 pairs of socks and 2 running shorts

Question

Scenario: Maylin is shopping at the sporting goods store for socks and running shoes. She has determined the following total benefit derived from each quantity of socks and running shoe
 
-Now suppose the price of running shorts doubles to $20,socks remain priced at $10 per pair,and Maylin has $150 of income.What consumption bundle maximizes Maylin's total benefit at the new,higher price of running shorts?
A) 5 pairs of socks and 5 running shorts 
B) 4 pairs of socks and 4 running shorts 
C) 3 pairs of socks and 3 running shorts 
D) 2 pairs of socks and 2 running shorts

Quizplus · Accepted Answer

At the new price, Maylin can afford to buy 15 pairs of socks or 7.5 pairs of running shorts. The consumption bundle that maximizes her total benefit is the one that gives her the highest indifference curve. This is the bundle that is tangent to her budget line. The budget line is given by the equation 20x + 10y = 150, where x is the number of running shorts and y is the number of pairs of socks. The indifference curve is given by the equation U(x,y) = x^a * y^b, where a and b are positive constants. The slope of the indifference curve is given by -a/b * x/y. The slope of the budget line is -20/10 = -2. The consumption bundle that maximizes Maylin's total benefit is the one where the slope of the indifference curve is equal to the slope of the budget line. This occurs when x = 5 and y = 5.

Scenario: Maylin Is Shopping at the Sporting Goods Store for Socks