Quelpr
3 marksTheory of Consumer Demand

CAPE Economics Unit 1 · 2018 · Paper 2 · Question 1(b)(ii)

Table 1 provides data on an individual's total utility from consuming units of chocolate bars and candy bars. The price of a chocolate bar is 4 and the price of a candy bar is 2.

Explain why the optimal bundle of the two goods would be 1 unit of chocolate bars and 2 units of candy bars.

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Other parts of this question

  1. 1(a)(i)Define the term 'the law of equi-marginal utility'.[2 marks]
  2. 1(a)(ii)Define the term 'producer surplus'.[2 marks]
  3. 1(b)(i)Complete Table 1 given that the price of one chocolate bar is 4 and the price of one candy bar is 2.[8 marks]
  4. 1(c)With the aid of a well-labelled diagram, assess the total welfare effect of the imposition of an indirect tax on candy bars.[10 marks]

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