Cindy Consumes Goods X and Y

question 36

Multiple Choice

Cindy consumes goods x and y.Her demand for x is given by x(p_x, m) = 0.05m =5.15p_x.Now her income is $419, the price of x is $3, and the price of y is $1.If the price of x rises to $4 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then

• A)DI = -0.28 and DS = -0.52.
• B)DI = -0.28 and DS = -4.88.
• C)DI = -0.52 and DS = -0.52.
• D)DI = 0 and DS = -2.00.
• E)None of the above.

---

Definitions:

Studying Economics

The academic pursuit of understanding how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their desires and needs.

Opportunity Cost

Opportunity Cost is the foregone benefit that would have been derived by choosing the next best alternative when making a decision.

Marginal Analysis

An examination of the added benefits of an activity compared to the added costs incurred by that same activity.

Cell Phones

Portable electronic devices that allow users to make voice calls, send text messages, and access various digital services.