Suppose a consumer spends all income on goods X and Y. Suppose the price of good Y increases and the consumer's income decreases. Which of the following must be true?
A) The amount of good Y that the consumer can purchase increases.
B) The amount of good X that the consumer can purchase increases.
C) The amount of good X that the consumer can purchase decreases and the amount of good Y that the consumer can purchase increases.
D) The amounts of good X and good Y that the consumer can purchase decrease.

Question

Quizplus · Accepted Answer

With an increase in the price of good Y and a decrease in income, the consumer's purchasing power decreases for both goods, leading to a reduction in the quantities of goods X and Y that can be purchased.

Suppose a Consumer Spends All Income on Goods X and Y