Sam consumes only sandwiches and soda and maximizes his total utility. Suppose that the price of a sandwich falls. At the new consumer equilibrium, Sam substitutes ________ for ________. Sam's marginal utility from soda ________ and his marginal utility per dollar spent on sandwiches ________.
A) sandwiches; soda; increases; increases
B) soda; sandwiches; decreases; increases
C) sandwiches; soda; increases; decreases
D) soda; sandwiches; stays the same; stays the same

Question

Quizplus · Accepted Answer

When the price of a sandwich falls, Sam will substitute sandwiches for soda because sandwiches are now relatively cheaper. This will increase his marginal utility from sandwiches and decrease his marginal utility from soda.

Sam Consumes Only Sandwiches and Soda and Maximizes His Total