The Rational Consumer - Work It Out: Question 4 of 4 The price of bagels increases to $4, but the price of coffee remains at $2 per cup. Which bundle is her optimal bundle assuming she still has $8 of income?

1 bagels and 2 cups of coffee.

Explanation:

The price of bagels increased to $4 but the price of coffee stayed at $2 per cup. But her incomes still remains at $8.

let x = quantity of bagel

y = quantity of coffee (cups)

income cost = $8

8 = 4x + 2y

8 = 4 (1) + 2 (2)

it's equal to 8.

1 bagels and 2 cups of coffee.

Note that consumption bundle is a set of product a consumer choose to consume base on her taste and preference. It is also affected by the consumer's budget and this can be used to get the total utility. From the question consumption bundles that lies on his/her budget line are coffee and bagels.