Charlie's Utility Function Is X_Ax_B

question 7

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 $5 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by

• A)4 apples.
• B)13 apples.
• C)8 apples.
• D)16 apples.
• E)None of the above.