Smedley,a careful utility maximizer,consumes peanut butter and broccoli.Assume that both peanut butter and broccoli are normal goods.Right after he achieves the utility-maximizing level of consumption of the two goods,the price of broccoli increases.To adjust to this event,he consumes _____ peanut butter and _____ broccoli.
A)more;less
B)less;less
C)more;more
D)less;more

Question

Quizplus · Accepted Answer

When the price of broccoli increases, Smedley will consume less broccoli due to the substitution effect. To maintain utility maximization, he will consume more peanut butter, which is now relatively cheaper.

Smedley,a Careful Utility Maximizer,consumes Peanut Butter and Broccoli