Alexi has a budget of $21 to spend on toaster and breads. He does not directly gain any utility from owining a toaster but for every slice of toasted bread he consumes he gain 2 units of utility, that is if he owns a toaster. Without the toaster, he gain 0 units of utility from consuming plain bread. Suppose the toaster has inferior quality and will break after toasting only 10 slices, then Alexi needs to buy a new one. The current market price for cheap toaster is $5 and the price for a single slice of bread is $1. Assume that Alexi aims to maximize consumer surplus.

Find Alexi's income-consumption curve for slices of bread for incomes between $0 and $21, assuming a price of $1 per slice.

Answer rating: 100% (QA)

Answer Utility refers to the total amount of satisfaction that derived fr... View the full answer