You and I Both Have Homothetic Tastes

question 19

Multiple Choice

You and I both have homothetic tastes.When the price of peaches goes up, you buy more strawberries and I buy fewer.Which of the following must be true.

• A)Peaches are more substitutable with strawberries for me than they are for you.
• B)Peaches are more substitutable with strawberries for you than they are for me.
• C)Strawberries are normal goods for you and inferior goods for me.
• D)Strawberries are normal goods for me and inferior goods for you.
• E)Both (a) and (c).
• F)Both (b) and (c).
• G)Both (a) and (d)
• H)Both (b) and (d)

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Definitions:

Market Price

The current value at which a good or service can be bought or sold in a marketplace, determined by the forces of supply and demand.

Perfect Price Discrimination

Perfect price discrimination occurs when a seller charges every consumer the maximum they are willing to pay, capturing the entire consumer surplus as profit.

Marginal Revenue

The additional revenue that a company gains by selling one more unit of a product or service.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded, typically downward sloping.