Question

We are to buy quantities of two items: n1 units of item 1 and n2 units of item 2. An isocost equation shows the relationship between the number of units of each of the two items to be purchased when the total purchase price is predetermined. If the total purchase price is predetermined to be C = 155 dollars, and item 1 costs $5.87 per unit and item 2 costs $3.61 per unit, find the isocost equation for items 1 and 2.

a. 5.87n1 - 3.61n2 = 155
b. 3.61n1 + 5.87n2 = 155
c. (5.87 + 3.61)(n1 + n2) = 155
d. 5.87n1 + 3.61n2 = 155

Answer 1

Option D is correct.

The isocost equation is 5.87 n₁ + 3.61 n₂ = 155

Explanation:

The cost of item 1 is $5.87 per unit.

The cost of item 2 is $3.61 per unit.

Number of units of item 1 to be purchased is n₁

Number of units of item 2 to be purchased is n₂

Predetermined total purchase price = C = $155

Total cost of purchasing n₁ quantities of item 1 = $5.87n₁

Total cost of purchasing n₂ quantities of item 2 = $3.61n₂

The value of n₁ and n₂ have to be picked in such a way that the total amount spent on the two items (total amount spent on item 1, $5.87n₁ and total amount spent on item 2, $3.61n₂) just equals 155, that is,

5.87 n₁ + 3.61 n₂ = 155

This is option D.