Use the Following to Answer Questions

question 101

Multiple Choice

Use the following to answer questions:
Figure: Income and Substitution Effects
-(Figure: Income and Substitution Effects) Look at the figure Income and Substitution Effects. Carlos is consuming his optimal consumption bundle at point A when the price of gasoline falls. The dashed line tangent to I₁ shows a hypothetical budget line reflecting:

• A) the original income, the original price of cell phone minutes, and the new price of gasoline.
• B) the new price of gasoline in terms of cell phone minutes and a change in income to keep Carlos on the original indifference curve.
• C) the new price of gasoline in terms of cell phone minutes and a change in income to allow Carlos to reach an indifference curve higher than I₁.
• D) the income and substitution effects.

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Definitions:

Equation

A mathematical statement asserting the equality of two expressions, typically involving one or more variables.

Graph

A visual representation of data or mathematical functions typically displayed using lines, bars, or points on a coordinate system.

Equation

A mathematical proposition that claims equality between two expressions, generally involving variables.

Matching

Matching is a process of pairing or associating items that are similar or correspond to each other, often used in educational settings or algorithms.