If a consumer is choosing the optimal combinations of two goods X and Y, and then the price of good Y decreases, this causes:
A) MU/P of good X to increase, so the consumer now must buy more X to find a new optimal combination.
B) demand for good X to increase.
C) MU/P of good Y to increase, so the consumer now must buy more Y to find a new optimal combination.
D) MU/P of good Y to decrease, so the consumer now must buy more Y to find a new optimal combination.

Question

Quizplus · Accepted Answer

When the price of good Y decreases, its MU/P increases, making it a better value for the consumer. This will cause them to want to consume more of good Y in order to reach a new optimal combination. Therefore, the consumer must buy more Y to find the new optimal combination. The answer is not A, B, or D because they do not accurately describe the situation caused by the decrease in price of good Y.

If a Consumer Is Choosing the Optimal Combinations of Two