In the economy of Mungo, discussed in your workbook, there is a third person cal
ID: 1097965 • Letter: I
Question
In the economy of Mungo, discussed in your workbook, there is a third person called Ike. Ike has a red income of 56 and a blue income of 10. (Recall that blue prices are 1 bcu [blue currency unit] per unit of ambrosia and 1 bcu per unit of bubblegum. Red prices are 2 rcus [red currency units] per unit of ambrosia and 6 rcus per unit of bubblegum. You have to pay twice for what you buy, once in red currency, once in blue currency.) If Ike spends all of his blue income, but not all of his red income, then it must be that:
(a) he consumes at least 9 units of bubblegum.
(b) he consumes at least 1 units of ambrosia.
(c) he consumes exactly twice as much bubblegum as ambrosia.
(d) he consumes at least 17 units of bubblegum.
(e) he consumes equal amounts of ambrosia and bubblegum.
The correct answer is (b)he consumes at least 1 units of ambrosia.
Please explain how you solve this.
Explanation / Answer
Answer is b)
Because if he has to spend all of 10 BCUs. If he consumes no ambrosia and buys 10 bubblegums, he has to pay 10 BCU and 6*10 = 60 RCU. But he has only 56 RCU. SO he has to consume 1 bubblegum less and buy 1 ambrosia atleast by saving 10RCU and paying 2RCU instead.
Options C and D are not possible and Options A and E are not necessarily true always.