Charlie's Utility Function Is X_Ax_B

question 21

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 $6 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by

• A)16.67 apples.
• B)5 apples.
• C)8.33 apples.
• D)13.33 apples.
• E)None of the above.

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Definitions:

Consumer Group

A cluster of individuals or households with similar needs, preferences, or purchasing behaviors, often targeted by marketers for specific products or campaigns.

Income Disparity

The unequal distribution of income among different groups of people, often leading to economic and social inequalities.

Upper-Income Groups

Segments of the population with higher than average income levels, usually associated with greater purchasing power and consumption patterns.

Lower-Income Groups

Demographic groups characterized by income levels that are below the median for a given area, often facing financial constraints.