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 <u>Inferior good </u>because it has a negative income elasticity
E) The cross-price elasticity for video games and computer equipment is : <u>Positive</u>
<h3>Analysis of the solutions </h3>
<u>A) The total utility from purchasing 3 video games and 2 pepsis</u>
marginal utility of 3 videos games = 12
marginal utility of 2 pepsi = 9
therefore total utility = 12 + 9 = 21
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<u>B) </u><u>The </u><u>quantity </u><u>of video games and Pepsi maximizes Oscar’s utility</u>
The quantity of video games with the maximum utility ( 20 ) = 1
The quantity of video games with the maximum utility ( 10 ) = 1
<u>Given that :</u>
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 <u>positive </u>
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Hence we can conclude that the answers to your question are as listed above
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