Dave Consumes Two Normal Goods, X and Y, and Is

question 505

Multiple Choice

Dave consumes two normal goods, X and Y, and is currently at an optimum. If the price of good X falls, we can predict with certainty that

• A)Dave will consume more of both goods because his real income has risen.
• B)the substitution effect will be positive for good X and negative for good Y.
• C)Dave may consume more or less of good X, but he will consume less of good Y.
• D)the substitution effect will offset the income effect for good X.

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Definitions:

Output Values

The results or final products generated from a process, system, or activity.

Coffee Farmer

An individual or entity engaged in the cultivation and harvesting of coffee beans.

Profit Maximized

A condition in which a firm achieves the maximum possible profit given its production costs and market conditions, often determined by the intersection of marginal cost and marginal revenue.

Competitive Firm

A company operating in a market where it competes with other entities for market share and profits by offering the best possible mix of price and quality.