Goods 1 and 2 Are Perfect Complements, and a Consumer

question 14

Multiple Choice

Goods 1 and 2 are perfect complements, and a consumer always consumes them in the ratio of 2 units of good 2 per unit of good 1.If a consumer has an income of $300 and if the price of good 2 changes from $5 to $6, while the price of good 1 stays at $1, then the income effect of the price change

• A)is exactly twice as strong as the substitution effect.
• B)accounts for the entire change in demand.
• C)does not change demand for good 1.
• D)is 6 times as strong as the substitution effect.
• E)is 5 times as strong as the substitution effect.

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Definitions:

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A theoretical approach in psychology that seeks to explain behavior through the lens of adaptation and natural selection.

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