When the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup, Jim able to buy 10 muffins and 20 coffees. Jim A. is; does not buy this combination because the marginal rate of substitution has changed. O B. is; buys this combination because the marginal rate of substitution has not changed. O C. is not; does not buy this combination because with the change in price he can no longer buy 2 cups of coffee to drink with each muffin O D. is not; does not buy this combination because he can't afford it Jim prefers to buy O A. muffins at $1.50 and coffee at $1.75 a cup OB. muffins at $1 and coffee at $2 a cup

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 8P
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Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and
coffee are ordinary goods.
Now, the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup.
Will Jim now be able and want to buy 10 muffins and 20 coffees?
Which situation does Jim prefer: muffins at $1 and coffee at $2 a cup or muffins at $1.50 and coffee at $1.75 a cup?
When the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup, Jim
able to buy 10 muffins and 20 coffees. Jim
O A. is; does not buy this combination because the marginal rate of substitution has changed.
B. is; buys this combination because the marginal rate of substitution has not changed.
O C. is not; does not buy this combination because with the change in price he can no longer buy 2 cups of coffee to drink with each muffin
O D. is not; does not buy this combination because he can't afford it
Jim prefers to buy
A. muffins at $1.50 and coffee at $1.75 a cup
O B. muffins at $1 and coffee at $2 a cup
Transcribed Image Text:Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and coffee are ordinary goods. Now, the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup. Will Jim now be able and want to buy 10 muffins and 20 coffees? Which situation does Jim prefer: muffins at $1 and coffee at $2 a cup or muffins at $1.50 and coffee at $1.75 a cup? When the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup, Jim able to buy 10 muffins and 20 coffees. Jim O A. is; does not buy this combination because the marginal rate of substitution has changed. B. is; buys this combination because the marginal rate of substitution has not changed. O C. is not; does not buy this combination because with the change in price he can no longer buy 2 cups of coffee to drink with each muffin O D. is not; does not buy this combination because he can't afford it Jim prefers to buy A. muffins at $1.50 and coffee at $1.75 a cup O B. muffins at $1 and coffee at $2 a cup
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