Charlie Consumes Apples and Bananas

question 17

Multiple Choice

Charlie consumes apples and bananas.His utility function is U(X_A, X_B) =x_Ax²_B.The price of apples is $1 the price of bananas is $2, and his income is $30 per week.If the price of bananas falls to $1

• A)Charlie demands fewer apples and more bananas.
• B)the substitution effect of the fall in banana prices reduces his apple consumption, but the income effect increases his apple consumption by the same amount.
• C)the substitution effect of the fall in the price of bananas reduces his banana consumption but the income effect increases his banana consumption by enough so that his banana consumption rises.
• D)the income used to calculate the substitution effect is higher than his original income, since the change made Charlie better off.
• E)More than one of the above is true.

---

Definitions:

Gross Profit Method

An inventory valuation method estimating the cost of goods sold and ending inventory based on gross margin percentages.

Gross Profit Ratio

A metric that shows the proportion of money left over from revenues after accounting for the cost of goods sold.

FIFO

FIFO stands for "First In, First Out," a method used in inventory management and accounting where the oldest inventory items are recorded as sold first.

Ending Inventory

The value of goods available for sale at the end of an accounting period, after accounting for all sales and purchases.