Gwen Is Consuming the Optimal Consumption Bundle of Potatoes and Steak

question 283

Multiple Choice

Gwen is consuming the optimal consumption bundle of potatoes and steak. Call this bundle A. Her income is $100, the price of steak is $10, and the price of potatoes is $1. Put potatoes on the vertical axis and put steak on the horizontal axis. Her income increases to $500, and the prices of steak and potatoes remain constant. With the increase in income, Gwen changes her consumption of the two goods and now maximizes utility at bundle B. If potatoes are inferior goods for Gwen,

• A) at bundle B, Gwen consumes more potatoes.
• B) at bundle B, Gwen consumes fewer steaks.
• C) at both bundles, the relative price is 10.
• D) at both bundles, Gwen consumes the same amount of potatoes and steaks.

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Definitions:

Brick-And-Mortar

Traditional physical retail stores as opposed to online or virtual stores.

Marketing Mix

The Marketing Mix is a framework that consists of the 4Ps: Product, Price, Place, and Promotion, used by businesses to market their products effectively.