Suppose a utility-maximizing person consumes only two goods,hamburgers and milkshakes.Suppose the price of milkshakes rises and all other variables remain constant.As a result,this person will certainly
A)purchase more milkshakes and fewer hamburgers.
B)reduce his/her consumption of both milkshakes and hamburgers.
C)consume more hamburgers and the same amount of milkshakes.
D)not increase his consumption of both milkshakes and hamburgers.
E)increase his/her consumption of milkshakes.

Question

Quizplus · Accepted Answer

When the price of milkshakes rises, the consumer will not increase consumption of both goods due to the substitution effect (substituting away from the more expensive good) and the income effect (reduced purchasing power).

Suppose a Utility-Maximizing Person Consumes Only Two Goods,hamburgers and Milkshakes