Question

Oscar consumes both video games and Pepsi.

Answer 1

A) Oscar's Total utility from purchasing 3 video games and 2 pepsis = 21

B) The quantity of video games and Pepsi maximizes Oscar’s utility = 2 video games and 5 Pepsi

C) When the price of Coca cola drops :   Oscars' demand for pepsi will drop

D) Pepsi is an Inferior good because it has a negative income elasticity

E) The cross-price elasticity for video games and computer equipment  is : Positive

Analysis of the solutions

A) The total utility from purchasing 3 video games and 2 pepsis

marginal utility of 3 videos games = 12

marginal utility of 2 pepsi = 9

therefore total utility = 12 + 9 = 21

B) The quantity of video games and Pepsi maximizes Oscar’s utility

The quantity of video games with the maximum utility ( 20 ) = 1

The quantity of video games with the maximum utility ( 10 ) =  1

Given that :

Oscars weekly income = $20

price of video game = $5

price of pepsi = $2

After the first purchase of video games and pepsi

$20 - $7 = $13

after the next purchase

$13 - $7 = $6

The balance $6 will purchase 3 more pepsi

Therefore the quantity of Video games to be purchased = 2 ( $10 )  (i.e.  15 utility )

Quantity of Pepsi to be purchased = 5 ( $10 ) ( i.e. 6 utility )

C) When the price of Coca cola drops Oscars' demand for Pepsi will drop as Coca cola is a competitor/superior  product.

D) Pepsi is an inferior good

E) The cross price elasticity for video games and computer equipment is positive

Hence we can conclude that the answers to your question are as listed above

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