Cindy Consumes Goods X and Y

question 26

Multiple Choice

Cindy consumes goods x and y.Her demand for x is given by x(p_x, m) = 0.04m -4.24p_x.Now her income is $322, the price of x is $2, and the price of y is $1.If the price of x rises to $3 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 and DS = -2.00.
• B)DI = -0.18 and DS = -0.52.
• C)DI = -0.52 and DS = -0.52.
• D)DI = -0.18 and DS= -4.06.
• E)None of the above.

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