Ron Starts Out in Consumer Equilibrium,consuming Two Goods,X and Y

question 95

Multiple Choice

Ron starts out in consumer equilibrium,consuming two goods,X and Y.The price of Y rises.Immediately after the rise in price

• A)MUX/PX > MUY/PY, and then Ron increases his consumption of Y.
• B)MUX/PX > MUY/PY, and then Ron decreases his consumption of Y.
• C)MUX/PX < MUY/PY, and then Ron increases his consumption of Y.
• D)MUX/PX < MUY/PY, and then Ron decreases his consumption of Y.
• E)none of the above.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases.

Inferior Good

A type of good whose demand decreases when consumer incomes increase.

Normal Good

An item that sees a rise in desire when the income of buyers increases, and experiences a decline in demand when the income of buyers drops.

Consumer Expectations

Anticipations of future prices, product quality, or available services that influence consumer decisions on spending and saving.