Question

Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. Candy bars cost $0.75 each while bags of peanuts cost $1.50 each.(a) Complete the table below showing the alternative combinations of the two products that are available. Consumption AlternativesGoods A B C D E F Candy Bars 0 4 8 12 16 20Bags of Peanuts

Answer 1

A: q1=0 q2= 10

B: q1=4 q2=8

C: q1=8 q2=6

D: q1=12 q2=4

E: q1=16 q2=2

F: q1=20 q2=0

Step-by-step explanation:

The budget constraint is $15. This is the amount of money to spend either all in candy bars or bags of peanuts or a combination of both.

Each candy bar costs $0,75 and a bag of peanuts costs $1,5. The budget equation is:

Y=0,75*q1+1,5*q2

Y= budget constraint

q1= quantity of candy bars consume

q2= quantity of peanuts bag consume

q1= (Y/0,75)-/1,5/0,75)*q2

q2=(Y/1,5)-(0,75/1,5)*q1

The maximum amount of candy bars= 20 (q1=15/0,75)

The maximum amount of peanuts bags= 10 (q2=15/1,5)

A:

q1=0 q2= 10

B:

q1=4 q2=8 [q2=(15/1,5)-(0,75/1,5)*4]

C:

q1=8 q2=6 [q2=(15/1,5)-(0,75/1,5)*8]

D:

q1=12 q2=4

E:

q1=16 q2=2

F:

q1=20 q2=0