Multiple Choice
Sam has $200 a month to spend on two normal goods-tanning sessions and rounds of golf. Tanning sessions are $20 each, and a round of golf is $40. Sam currently consumes six tanning sessions and two rounds of golf each month. If the price of a round of golf drops to $20, the income and substitution effects will cause Sam's consumption of tanning sessions to:
A) increase.
B) decrease.
C) change, but the direction is dependent upon which effect is stronger.
D) This cannot be answered without more information.
Correct Answer:
Verified
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