Ron starts out in consumer equilibrium,consuming two goods,X and Y.Ron's income rises.At this point,we can definitely conclude that A)MU_X/P_X MU_Y/P_Y,and then Ron increases his consumption of X. B)MU_X/P_X MU_Y/P_Y,and then Ron decreases his consumption of X. C)MU_X/P_X

Question

Ron starts out in consumer equilibrium,consuming two goods,X and Y.Ron's income rises.At this point,we can definitely conclude that A)MU_X/P_X > MU_Y/P_Y,and then Ron increases his consumption of X. B)MU_X/P_X > MU_Y/P_Y,and then Ron decreases his consumption of X. C)MU_X/P_X < MU_Y/P_Y,and then Ron increases his consumption of X. D)MU_X/P_X < MU_Y/P_Y,and then Ron decreases his consumption of X. E)none of the above.

Quizplus · Accepted Answer

The correct answer is "none of the above" because the question does not provide enough information to determine how Ron's consumption of goods X and Y will change with an increase in income. The change in consumption depends on whether the goods are normal or inferior, and the relative income and substitution effects, none of which are specified in the options provided.

Ron Starts Out in Consumer Equilibrium,consuming Two Goods,X and Y