A Consumer Has the Preferences as Shown in the Table

question 213

Essay

A consumer has the preferences as shown in the table. If his income is $230, the price of jeans is $20 per pair, and the price of a shirt is $30, how many pairs of jeans would this person buy? Suppose the price of jeans rises to $25. How many jeans would be purchased? Show your results in a demand curve.
$\begin{array}{|c|c|c|}\hline \text { Unit } & \begin{array}{c}\text { Marginal Utility } \\\text { of Jeans }\end{array} & \begin{array}{c}\text { Marginal Utility } \\\text { of Shirts }\end{array} \\\hline 1 & 110 & 210 \\\hline 2 & 90 & 195 \\\hline 3 & 85 & 180 \\\hline 4 & 80 & 150 \\\hline 5 & 75 & 120 \\\hline 6 & 50 & 108 \\\hline\end{array}$

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Definitions:

Return on Investment

Return on investment is a measure used to evaluate the efficiency or profitability of an investment, calculated as net income divided by the initial cost of the investment.

Selling Price

The amount at which a product or service is offered to customers, factoring in costs, desired profit margins, and market conditions.

Absorption Costing

An accounting system that factors in all production costs—direct labor, direct materials, and both fixed and variable manufacturing overheads—into the pricing of a product.

Cost-plus Pricing

is a pricing strategy where the selling price is determined by adding a specific markup to a product's cost.