A rational consumer spends her entire income.If her income doubles and prices do not change, then she will necessarily choose to consume twice as much of every good as she did before.

Question

Quizplus · Accepted Answer

This statement assumes that the consumer's preferences and budget constraints remain the same after the increase in income, which may not be true. The consumer may have different preferences or face different budget constraints, which could lead to different consumption choices. It is possible that the consumer may choose to save some of the additional income or spend it on different goods.

A Rational Consumer Spends Her Entire Income