Suppose that a market basket of two goods is changed by adding more of one of the goods and subtracting one unit of the other. The consumer will:
A) rank the market basket more highly after the change.
B) rank the market basket more highly before the change.
C) rank the market basket just as desirable as before.
D) any one of the above statements may be true.

Question

Quizplus · Accepted Answer

The answer depends on the preferences of the consumer for the two goods. If the added good is more preferred than the one subtracted, the consumer will rank the market basket more highly after the change (A). If the subtracted good is more preferred, the consumer will rank the market basket more highly before the change (B). If the two goods are equally preferred, the consumer will rank the market basket just as desirable as before (C). Therefore, any one of the above statements may be true (D).

Suppose That a Market Basket of Two Goods Is Changed