Pooh spends all his income on honey and maple syrup.Because he views honey and maple syrup as perfect substitutes, he is willing to substitute honey for maple syrup at the constant rate of 1 teaspoon of honey to 2 teaspoons of maple syrup.If the relative price of honey in terms of maple syrup is 2.2, Pooh's optimal consumption bundle will consist entirely of maple syrup.False

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Quizplus · Accepted Answer

Since Pooh views honey and maple syrup as perfect substitutes and is willing to substitute 1 teaspoon of honey for 2 teaspoons of maple syrup, he will choose the cheaper option. If the relative price of honey in terms of maple syrup is 2.2, it means honey is more expensive than his substitution rate, so he will consume only maple syrup.

Pooh Spends All His Income on Honey and Maple Syrup