How to allocated his entire budget to the purchase of apples

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Reference no: EM1352624

1. Suppose the income elasticity of demand for used jet skis is 3.5. If the level of income decreases by 1 percent, the number of used jet skis sold will, ceteris paribus:

a. Rise by 0.29 percent.

b. Rise by 3.5 percent.

c. Fall by 0.29 percent.

d. Fall by 3.5 percent.

2. Suppose Jason has allocated his entire budget to the purchase of apples and bananas. The marginal utility of the last apple purchased is 10 utils and each apple costs 10 cents. The marginal utility of the last banana purchased is 10 utils and each banana costs 5 cents. Jason should:

a. Select more apples and fewer bananas because he likes apples more than bananas.

b. Select more bananas and fewer apples because of the lower price for bananas.

c. Select more bananas and fewer apples because he gets more marginal utility per dollar from bananas.

d. Jason has made the choice that gives him the most total utility.

Reference no: EM1352624

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