Question

Suppose a quantity discount applies on purchases of a good. Specifically, the pricing arrangement is such that a consumer can purchase the first 10 units of the good for $6 each and all additional units (i.e., the 11th, 12th, etc.) can be purchased for $4 each. If the consumer has an income of $100, what is the maximum number of units of the good that the consumer can purchase?

Answer 1

The maximum number of units the consumer can purchase is 20 units.

Step-by-step explanation:

To find the maximum number of units of the good that the consumer can purchase, we need to determine the amount of money the consumer can spend on the good. The consumer's income is given as $100. Since the first 10 units cost $6 each, the consumer can spend $60 on the first 10 units. This leaves the consumer with $100 - $60 = $40 to spend on additional units. Since the additional units cost $4 each, the consumer can purchase an additional $40 / $4 = 10 units. Therefore, the maximum number of units the consumer can purchase is 10 + 10 = 20 units.