Suppose That P_x = 2 and P_y = 5

question 78

Multiple Choice

Suppose that p_x = 2 and p_y = 5. Jane spends her $100 income on 25 units of x and 10 units of y. When the price of x doubled to $10 per unit, Jane's father gave her an extra $50 so that she could buy the same bundle that she did before the price change. Assuming convex indifference curves, which of the following statements is true?

• A)No conclusions can be drawn regarding Jill's welfare unless we know her utility function
• B)Jill is just as well off as before the price change
• C)Jill is actually better off now than she was before
• D)Jill is worse off now than she was before

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