Consider a consumer that consumes 2 teaspoons of sugar with each cup of coffee. For each cup of coffee with sugar the consumer gains 10 utils. a) Write down the utility function that gives the total utility if the consumer consumes S teaspoons of sugar and C cups of coffee. The consumer has assigned £7 per week to be spent on drinking coffee with sugar. The current price of coffee is £0.50 per cup and each spoon of sugar costs £0.10. b) Calculate the optimal weekly consumption bundle for this consumer. c) Does the consumer view C and S as complements or substitutes?
Consider a consumer that consumes 2 teaspoons of sugar with each cup of coffee. For each cup of coffee with sugar the consumer gains 10 utils. a) Write down the utility function that gives the total utility if the consumer consumes S teaspoons of sugar and C cups of coffee. The consumer has assigned £7 per week to be spent on drinking coffee with sugar. The current price of coffee is £0.50 per cup and each spoon of sugar costs £0.10. b) Calculate the optimal weekly consumption bundle for this consumer. c) Does the consumer view C and S as complements or substitutes?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider a consumer that consumes 2 teaspoons of sugar with each cup of coffee. For each cup of coffee with sugar the consumer gains 10 utils.
a) Write down the utility function that gives the total utility if the consumer consumes S teaspoons of sugar and C cups of coffee. The consumer has assigned £7 per week to be spent on drinking coffee with sugar. The current price of coffee is £0.50 per cup and each spoon of sugar costs £0.10. b) Calculate the optimal weekly consumption bundle for this consumer.
c) Does the consumer view C and S as complements or substitutes?
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