Assume a Consumer Is Currently Purchasing a Combination of Goods,X

question 48

Multiple Choice

Assume a consumer is currently purchasing a combination of goods,X and Y,that maximizes her utility given her budget constraint,i.e.,MRSX,Y = PX/PY.Now assume that there is a decrease in the price of Y.In this case,to once again maximize her utility,the consumer will want to adjust her purchases of X and Y such that:

• A)the marginal rate of substitution of X for Y, i.e., MRSX,Y, decreases.
• B)the marginal rate of substitution of X for Y, i.e., MRSX,Y, stays the same.
• C)the marginal rate of substitution of X for Y, i.e., MRSX,Y, increases.
• D)none of the above. The consumer will continue to maximize her utility after the price change by continuing to consume the same combination of X and Y.

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