Ben Consumes Two Goods and His Utility Function Is U(x₁

question 34

Multiple Choice

Ben consumes two goods and his utility function is U(x₁, x₂) = x²₁x⁴₂. The price of good 2 does not change and his income does not change, but the price of good 1 decreases.

• A) The income effect is zero, since his income remained constant.
• B) The substitution effect on the demand for good 2 is zero, since the price of good 2 did not change.
• C) The substitution effect reduces the demand for good 2, and since the income effect is zero, the demand for good 2 falls.
• D) The substitution effect of the price change reduces the demand for good 2 and increases the demand for good 1.
• E) More than one of the above statements is true.

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Definitions:

Practitioner Agreements

Formal or informal understandings or contracts between professionals that outline expectations, ethics, and standards of practice.

Reasonable Effort

This term generally refers to the level of diligence and commitment that is considered fair or appropriate under given circumstances.

DBT

Dialectical Behavior Therapy refers to a comprehensive cognitive-behavioral approach designed to help people manage their emotions, cope with stress, and improve relationships.

Dialectical Conceptualization

A method in psychology that involves understanding issues or behaviors by examining opposing viewpoints and integrating them for a more comprehensive understanding.