If a Consumer Is at an Optimum, Consuming X and Y

question 46

Multiple Choice

If a consumer is at an optimum, consuming X and Y, and the price of Y decreases, then to get to a new equilibrium the consumer must

• A) purchase less X.
• B) purchase less Y.
• C) purchase more X.
• D) purchase more of both X and Y.

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Definitions:

Utility Function

A mathematical representation of how a consumer ranks different bundles of goods according to the level of satisfaction or happiness they provide.

Endowed

Provided with a quality, ability, or asset; often used in the context of endowed chairs in academia or endowed grants/funds.

Desert Island

A remote, uninhabited island, often used in hypothetical scenarios or survival narratives.

Competitive Equilibrium

A market state where supply equals demand, with no external influences, and prices are such that the quantity supplied is equal to the quantity demanded.