ECN 100 Mid-Term 1
(c) Now assume assume that on their own, Bottles cost $2 and Cans cost $1. However, in a
promotion, Coke will also give two cans away free for every bottle that is purchased. In
other words, if you buy X bottles, you also get 2X cans free. You have $80 to spend on
soda. Draw your opportunity set (reflecting the promotional deal) in the space below.
(d) If you have the same preferences for cans and bottles as articulated in part (a), what
will be your optimum bundle? Illustrate the answer in the picture above.
Now the optimal bundle will be a combination of bottles and cans, since the
cans are basically free you would spend all your money on 40 bottles and also
consume the 80 cans.