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

Question

Quizplus · Accepted Answer

With an increase in income and a decrease in the price of good Y, the consumer can afford more of both goods X and Y, assuming the price of X remains constant and the consumer's preferences do not change.

Suppose a Consumer Spends All Income on Goods X and Y