Suppose that Joan, the only consumer of pork, has a downward-sloping demand curve for pork and faces an upward-sloping supply curve.If her demand curve shifts out because she develops a craving for pork, then at the new equilibrium (everything else equal),
A)the price of pork relative to other goods will be higher than before.
B)Joan's marginal utility from every unit of pork she eats will be higher than before.
C)Joan's real income will be lower than before.
D)All of the responses are correct.

Question

Quizplus · Accepted Answer

When Joan's demand for pork increases due to her craving, it shifts the demand curve to the right. This results in a new equilibrium with a higher price for pork (A is correct because the price of pork relative to other goods increases). Since Joan is now willing to pay more for pork, indicating she values it more, her marginal utility from each unit of pork is higher at the point of consumption (B is correct). However, because the price of pork has increased and she spends more on pork, her real income, in terms of purchasing power for other goods, decreases (C is correct). Therefore, all of the responses are correct.

Suppose That Joan, the Only Consumer of Pork, Has a Downward-Sloping