econ 300 all questions from problems 1

Problems involving perfect substitutes are the easiest to

solveâ€”all you have to do is figure out which good is least expensive given the

utility provided. When the goods are identical (Exxon and Chevron), this is easyâ€”

the consumer will choose to spend all of his or her budget on the good with the

lowest price.6 If Exxon costs $3 per gallon, and Chevron is $3.25, he or she will buy

only Exxon. If the gasoline budget is $30, 10 gallons will be bought.