-Max Has Allocated $100 Toward Meats for His Barbecue

question 36

Multiple Choice

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

• A) Max will double his consumption of both meats.
• B) Max will spend it all on burger. Because of its lower price, he can buy more of it.
• C) Max will take advantage of the gift by buying all chicken because it is the more expensive meat.
• D) There is not enough information to answer the question.

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Definitions:

Subjective Value

The individual and personal valuation of a good or service rather than its market value, based on personal preferences, needs, or satisfaction derived.

Equilibrium

A balance between market demand and supply that results in steady prices.

Budget Line

A budget line represents all combinations of goods and services that a consumer may purchase given current prices and income levels.

Marginal Rate of Substitution

How quickly a person agrees to trade one product for a different one to preserve their overall happiness.