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A consumer has 40 dollars. The price of x is 5 dollars, and the price of y is 5 dollars. A seller wants to boost the sales of x by giving the consumer a coupon. Coupon $A$ is "buy 4 get 2 for free (can be used for only once)". Coupon $B$ is "20% off". Both coupons are only for purchasing x. (a) Write down the three budget constraint equations: (1) no coupons, (2) Coupon A, and (3) Coupon B. (b) Draw the budget constraint lines of three equations. (c) Suppose the consumer has a utility function: U(x,y) = min{kx, y). For what values of k, does Coupon A boost sales more than Coupon B?

A consumer has 40 dollars. The price of x is 5 dollars, and the price of y is 5 dollars. A seller wants to boost the sales of x by giving the consumer a coupon. Coupon $A$ is "buy 4 get 2 for free (can be used for only once)". Coupon $B$ is "20% off". Both coupons are only for purchasing x. (a) Write down the three budget constraint equations: (1) no coupons, (2) Coupon A, and (3) Coupon B. (b) Draw the budget constraint lines of three equations. (c) Suppose the consumer has a utility function: U(x,y) = min{kx, y). For what values of k, does Coupon A boost sales more than Coupon B?

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 6P
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A consumer has 40 dollars. The price of x is 5 dollars, and the price of y is 5 dollars. A seller wants to boost the sales of x by giving the consumer a coupon. Coupon $A$ is "buy 4 get 2 for free (can be used for only once)". Coupon $B$ is "20% off". Both coupons are only for purchasing x. (a) Write down the three budget constraint equations: (1) no coupons, (2) Coupon A, and (3) Coupon B. (b) Draw the budget constraint lines of three equations. (c) Suppose the consumer has a utility function: U(x,y) = min{kx, y). For what values of k, does Coupon A boost sales more than Coupon B?
Transcribed Image Text:A consumer has 40 dollars. The price of x is 5 dollars, and the price of y is 5 dollars. A seller wants to boost the sales of x by giving the consumer a coupon. Coupon $A$ is "buy 4 get 2 for free (can be used for only once)". Coupon $B$ is "20% off". Both coupons are only for purchasing x. (a) Write down the three budget constraint equations: (1) no coupons, (2) Coupon A, and (3) Coupon B. (b) Draw the budget constraint lines of three equations. (c) Suppose the consumer has a utility function: U(x,y) = min{kx, y). For what values of k, does Coupon A boost sales more than Coupon B?
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