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Questions › DSE › DSE 2016 › Q25
0 marksMicroeconomics › Budget constraint and consumer equilibrium › Non-standard budgets: bundles, rationing and quantity limitsHardabout 3 min

DSE 2016 Question 25: Budget constraint and consumer equilibrium

A consumer's utility over three goods X,Y,ZX,Y,ZX,Y,Z is U=y min⁡{x,z}U=y\,\min\{x,z\}U=ymin{x,z}. All three prices are equal. Three deals are offered: Deal I: get a unit of Z free with a unit of X. Deal II: get a unit of Z free with a unit of Y. Deal III: get 12\tfrac1221​ unit of X and 12\tfrac1221​ unit of Z free with a unit of Y. Which deal should the consumer choose?

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A consumer's utility over three goods X,Y,Z is U=y min {x,z}. All three prices are equal. Three deals are offered: Deal I: get a unit of Z free with a unit of X. Deal II: get a unit of Z free with a unit of Y. Deal III: get 1/2 unit of X and 1/2 unit of Z free with a unit of Y. Which deal should the consumer choose? (A) Deal I (B) Deal II (C) Deal III (D) All the deals are equally good

Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.

What this question tests

This question is on Non-standard budgets: bundles, rationing and quantity limits, part of Budget constraint and consumer equilibrium in Microeconomics.

Budget sets with bundled offers, tie-ins, quantity caps, block prices or liquidity constraints.

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Question from the DSE 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.