If the consumer, at her current consumption bundle, on her budget constraint, is

Question

If the consumer, at her current consumption bundle, on her budget constraint, is willing to give up 3 units of food (vertical axis) in exchange for 1 unit of shelter (horizontal axis) and food is priced at 10 and shelter at 20, then the consumer is:

a) purchasing too much food and too little shelter for utility maximization.
b) purchasing too much shelter and too little food for utility maximization.
c) purchasing just the right amount of each good for utility maximization.
d) not enough information is given to be able to determine which of a, b, or c above is true.

Explanation / Answer

a) purchasing too much food and too little shelter for utility maximization. (she is willing to give up a basket worth 30 for a different basket worth 20). Remember to rate!

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