If an Individual Buys Only Two Goods and These Must

question 29

Multiple Choice

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g.,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup) ,then

• A)there is no substitution effect from a change in the price of coffee.
• B)there is no income effect from a change in the price of coffee.
• C)Giffen's Paradox must occur if both coffee and cream are inferior goods.
• D)an increase in income will not affect cream purchases.