Javon is consuming his optimal utility-maximizing consumption bundle of lobster and macaroni- and-cheese dinners when he loses his job and has less money to spend on lobster and macaroni- and-cheese dinners.Both goods are normal goods.When he adjusts his consumption to reflect the new level of income, the number of macaroni-and-cheese dinners he consumes:
A)rises.
B)falls.
C)stays the same.
D)changes, but it is impossible to determine in what way.

Question

Quizplus · Accepted Answer

Since both goods are normal goods and Javon has less income, he will have to decrease the amount he spends on both goods. However, he will likely decrease his consumption of more expensive lobster dinners and maintain or increase his consumption of cheaper macaroni-and-cheese dinners. Therefore, the number of macaroni-and-cheese dinners he consumes will likely fall.

Javon Is Consuming His Optimal Utility-Maximizing Consumption Bundle of Lobster