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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