Ahmed spends all of his money on movie tickets and groceries. Suppose Ahmed is presented with two options: A and B. Option A gives him a voucher of $X that he can only spend on groceries. Option B gives him $X that he can spend on either or both of the goods. Which of the following is correct assuming Ahmed is indifferent between the two options?
A) Ahmed spends at least $X on groceries.
B) Ahmed spends less than $X on groceries.
C) Ahmed must be indifferent between movie tickets and groceries.
D) Ahmed spends his entire income on movie tickets.

Question

Quizplus · Accepted Answer

If Ahmed is indifferent between receiving a voucher specifically for groceries or receiving cash of the same value, it implies he was already planning to spend at least $X on groceries. If he were planning to spend less, he would prefer the cash to have the flexibility to allocate spending as he wishes.

Ahmed Spends All of His Money on Movie Tickets and Groceries