Answer to Question #104152 in Microeconomics for Varuna Ahuja

Question

A recent newspaper circular advertised the following special on tires: “Buy three, get the fourth tire for free—limit one free tire per customer.” If a consumer has $500 to spend on tires and other goods and each tire usually sells for $50, how does this deal impact the consumer’s opportunity set?

Answer 1

A consumer who has $500 as income is spending on tire. The price of tire is $50 for each tires with an extra for 4 tires purchase.So the maximum tires he can purchase is (10+2)= units with zero units of any other good