Two goods in an individual's consumption bundle are perfect substitutes.For a given amount of income,the individual's optimal consumption bundle will contain:
A)exactly 50% of each of the two goods.
B)only the good with the lower price.
C)only the good with the higher price.
D)all of the good on the horizontal axis.

Question

Quizplus · Accepted Answer

When two goods are perfect substitutes, the consumer will choose to consume only the good with the lower price, as it maximizes their utility for a given amount of income by allowing them to purchase more of the good compared to the higher-priced substitute.

Two Goods in an Individual's Consumption Bundle Are Perfect Substitutes