FIGURE 6-2
-Refer to Figure 6-2.Suppose that the price of Y is $1 and the consumer's income is $10.Initially,the price of X is $2 and the consumer is buying 4 units of good Y.If the price of X then falls to $1,which of the following pairs of quantities of X correctly completes the demand schedule below? Price of X: $1 $2
Quantity Demanded of X: ________ ________
A)2; 4
B)4; 4
C)4; 3
D)6; 3
E)6; 4

Question

FIGURE 6-2
-Refer to Figure 6-2.Suppose that the price of Y is $1 and the consumer's income is $10.Initially,the price of X is $2 and the consumer is buying 4 units of good Y.If the price of X then falls to $1,which of the following pairs of quantities of X correctly completes the demand schedule below? Price of X: $1 $2
Quantity Demanded of X: ________ ________
A)2; 4 
B)4; 4 
C)4; 3 
D)6; 3 
E)6; 4

Quizplus · Accepted Answer

When the price of X falls from $2 to $1, the consumer can now afford to buy more of both goods. The income effect will lead the consumer to buy more of both goods, but the substitution effect will lead the consumer to buy more of good X and less of good Y. The net effect is that the consumer will buy more of good X and less of good Y. Therefore, the correct answer is D) 6; 3.

FIGURE 6-2 -Refer to Figure 6-2.Suppose That the Price of Y Is