Suppose the Price of Soda Is $2 Each and the Price

question 9

Multiple Choice

Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. David maximizes his utility by buying only sodas and pizza. He buys 5 sodas and 10 slices of pizza. If the price of a soda increases to $3 each, David will

• A) decrease the number of sodas bought and the demand curve for sodas will shift leftward.
• B) decrease the number of sodas bought and move along the demand curve for soda.
• C) buy more pizza and move along the demand curve for pizza.
• D) buy less pizza and the demand curve for pizza will shift leftward.

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Definitions:

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other.

Complements

Two goods for which an increase in the price of one leads to a decrease in the demand for the other.

Budget Constraints

A representation of the trade-offs between different goods and services that a consumer can afford with their limited income.

Optimum

The most favorable condition or level for growth, reproduction, or efficiency, or the best or most efficient use of resources.