Charlie's Utility Function Is X_Ax_B

question 21

Multiple Choice

Charlie's utility function is x_Ax_B.The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40.If the price of apples increased to $6 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by

• A)16.67 apples.
• B)5 apples.
• C)8.33 apples.
• D)13.33 apples.
• E)None of the above.

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Definitions:

Unobservable Components

Elements or factors within a system or process that cannot be directly seen or measured but influence outcomes.

Culture

The collective social behavior, norms, knowledge, beliefs, arts, laws, customs, capabilities, and habits of the people in these societies.

Expectations

The beliefs or forecasts people have about the future or about the outcomes of specific actions.

Observable Culture

The components of culture that can be seen in an organization.