2010 que 37

[madhur1987]

pls someone help....why under buy 1 get 1 free scheme.... the optimal demand is still x* and y*. he can get more of both goods with same money income and increase his utility than why not option a is correct???

[madhur1987]

pls if someone can give reason for this?

[duck]

Hi.. :)

Its because that bundle is not affordable.
Had it been affordable then, (x*,y*) wouldn't be a utility maximising bundle.