Figure 21-9

-Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $100 and currently optimizes at point A.When the price of marshmallows decreases to $5,which point will the optimizing consumer choose?
A)Point A
B)Point B
C)Point C
D)Point D

Question

Figure 21-9
 
-Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $100 and currently optimizes at point A.When the price of marshmallows decreases to $5,which point will the optimizing consumer choose?
A)Point A 
B)Point B 
C)Point C 
D)Point D

Quizplus · Accepted Answer

When the price of marshmallows decreases to $5, the budget constraint will shift outwards, allowing the consumer to purchase more marshmallows at the same level of income. Point B is the new optimal point since it lies on the new budget constraint and provides the consumer with the highest level of utility at the new prices.

Figure 21-9 -Refer to Figure 21-9.Assume That the Consumer Depicted in the Consumer