Answer to Question #102771 in Macroeconomics for lana

Question

A consumer has $25 in budget to purchase goods X & Y. Assume Px = 3 and Py=1. She has a coupon that allows her to buy-one-get-one-free for up to 5 units of X. What is the maximum amount of X that she can buy?

Answer 1

budget =$25

Px= 3

Py= 1

budget line, $bl=Px/Py$ = 3/1= 3

If the consumer buys five units of X he gets five more units, therefore, the amount of X he can buy is given by:

$3*5units + (15)$ =30 units