Some parents struggling with back-to-school buys. "A couple of years ago, I was able to buy everything practically new," said Charles Lane-Bey, a U.S. Postal Service worker who's struggling to make ends meet. Suppose Charles has $10 to spend on back-to-school clothing for his son, and pants cost 50 cents and the price of shirts has decreased from $1 to 50 cents. What is the effect of the fall in price of shirts on Charles's real income in terms of pants?
A) It increases from 10 to 20.
B) It decreases from 10 to 5.
C) It does not change.
D) It increases from 20 to 40.

Question

Quizplus · Accepted Answer

The fall in price of shirts from $1 to 50 cents means that Charles can now buy 2 shirts for the price of one pants. Therefore, his real income in terms of pants remains the same, as he can still buy the same number of shirts and pants with his $10.

Some Parents Struggling with Back-To-School Buys