Kevin, who is currently maximizing his utility, buys movies and computer games. If the price of computer games drops
A) Kevin will then consume only computer games and zero movies.
B) equilibrium will not be disturbed because it is a permanent condition.
C) Kevin is temporarily in disequilibrium and will buy more games and fewer movies in order to re-establish equilibrium.
D) Kevin is temporarily in disequilibrium and will buy more movies and fewer games in order to re-establish equilibrium.

Question

Quizplus · Accepted Answer

When the price of computer games drops, Kevin, aiming to maximize his utility, will find himself in a temporary disequilibrium because the relative prices of the goods he consumes have changed. To restore equilibrium and maximize his utility under the new price conditions, he will adjust his consumption by buying more computer games (now cheaper) and fewer movies, thereby reallocating his budget to achieve a new optimal mix of goods.

Kevin, Who Is Currently Maximizing His Utility, Buys Movies and Computer