Joe's Utility Function Is Given by U(x,y)= Min[x,y]

question 20

Multiple Choice

Joe's utility function is given by U(x,y) = min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

• A)the income effect is zero.
• B)the income effect is equal to 2.
• C)the income effect is equal to 1.
• D)the total effect is zero.

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Definitions:

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