Suppose a cup of coffee at the campus coffee shop is $2.50 and a cup of hot tea is $1.25 and that a student's beverage budget is $20 per week.What is the market tradeoff between coffee and tea?
A)1 coffee to 1 tea
B)2 coffee to 1 tea
C)1 coffee to 2 tea
D)2 coffee to 2 tea

Question

Quizplus · Accepted Answer

If a student is on a budget of $20 per week, they can buy either 8 cups of coffee or 16 cups of tea or some combination of the two.

With one coffee costing $2.50 and one tea costing $1.25, the cost of 1 coffee is equivalent to 2 teas. Therefore, a student on a budget of $20 per week can buy 8 cups of coffee ($2.50 x 8 = $20) or 16 cups of tea ($1.25 x 16 = $20) or a combination like 4 coffees and 8 teas ($2.50 x 4 + $1.25 x 8 = $20).

So, the market tradeoff between coffee and tea is 1 coffee to 2 tea, making choice C the best choice(s).

Suppose a Cup of Coffee at the Campus Coffee Shop