Kalini spends all of her income on movie tickets and groceries. Suppose Kalini is presented with two options: A and B. Option A gives her a voucher of $X that she can only spend on groceries. Option B gives her $X that she can spend on either or both of the goods (a transfer of cash). Assuming Kalini prefers Option B to Option A and purchases positive values of movie tickets and groceries, which of the following is correct?
A) Kalini values the choice that the cash transfer offers.
B) Kalini does not gain any utility by consuming groceries.
C) Kalini does not value the choice that the cash transfer offers.
D) Kalini does not gain any utility by consuming movie tickets.

Question

Quizplus · Accepted Answer

The Answer of Kalini spends all of her income on movie tickets and groceries. Suppose Kalini is presented with two options: A and B. Option A gives her a voucher of $X that she can only spend on groceries. Option B gives her $X that she can spend on either or both of the goods (a transfer of cash). Assuming Kalini prefers Option B to Option A and purchases positive values of movie tickets and groceries, which of the following is correct?
A) Kalini values the choice that the cash transfer offers.
B) Kalini does not gain any utility by consuming groceries.
C) Kalini does not value the choice that the cash transfer offers.
D) Kalini does not gain any utility by consuming movie tickets.

Kalini Spends All of Her Income on Movie Tickets and Groceries