When the prices were ($4, $1), Maria chose the bundle (x, y) = (8, 6). Now at the new prices, (p_x, p_y), she chooses the bundle (x, y) = (7, 9). For Maria's behavior to be consistent with the weak axiom of revealed preference, it must be that

Question

Quizplus · Accepted Answer

We know that Maria chose bundle (8,6) when the prices were ($4, $1). This means that the cost of bundle (8,6) was $32 for x and $6 for y. Now, at the new prices, Maria chooses bundle (7,9). This means that the cost of bundle (7,9) is $28p_x for x and $9p_y for y. For Maria's behavior to be consistent with the weak axiom of revealed preference, this new bundle (7,9) must be preferred over the old bundle (8,6). In other words, the cost of the new bundle cannot be more expensive than the cost of the old bundle. So we have: $28p_x < $32 (for x) $9p_y < $6 (for y) Simplifying these inequalities, we get: p_x < $32/$28 = $8/$7 p_y < $6/$9 = $2/$3 Multiplying the second inequality by 3/2, we get: 3/2 * p_y < $1 So the best answer is C) 3p_y < p_x.

When the Prices Were ($4, $1), Maria Chose the Bundle