What spends a dollar buying a first cup of coffee

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Reference no: EM13206617

Suppose that Omar's marginal utility for sups of coffee is constant at 5.5 utils per cup no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the third he eats, and so on (declining by 1 util per additional doughnut). In addition suppose that coffee costs $1 per 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: EM13206617

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