If a Consumer Is Choosing the Optimal Combinations of Two

question 9

Multiple Choice

If a consumer is choosing the optimal combinations of two goods X and Y, and then the price of good Y decreases, this causes:

• A) MU/P of good X to increase, so the consumer now must buy more X to find a new optimal combination.
• B) demand for good X to increase.
• C) MU/P of good Y to increase, so the consumer now must buy more Y to find a new optimal combination.
• D) MU/P of good Y to decrease, so the consumer now must buy more Y to find a new optimal combination.
• E) the demand for good X and good Y will not change.

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Definitions:

Buyer Responsiveness

THe degree to which consumers change their demand for a product or service in response to changes in its price or attributes.

Fixed Costs

Business expenses that remain constant regardless of the level of production or business activity, such as rent, salaries, and loan payments.

Cross Elasticity

A measure of how the demand for one good responds to a change in the price of another good.

Normal Good

A good for which demand increases as the income of consumers increases, and falls when consumer income decreases.