Spend a dollar buying a first cup of coffee

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Suppose that omar's marginal utility for cups of coffee is constant at 1.5 utils per cup no matter how many he drinks. On the otherhand, his marginal utility per doughnut is 10 for the first doughnut he eats, 8 for the third he eats, and so on. In addition, suppose that coffee costs $1per cup, doughnuts cost $1 each, and omar has a budget that he can spend only on doughnuts, coffee, or both. How big would that budget have to be before he would spend a dollar buying a first cup of coffee?

Reference no: EM13885857

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