Assume the consumer is correctly applying the rational spending rule for goods jeans and t-shirts.If the price of jeans falls,purchases of jeans and t-shirts rise because
A)the marginal utility of jeans increases.
B)the marginal utility of t-shirts increases.
C)the marginal utility of jeans decreases.
D)combinations of jeans and t-shirts that could not be considered before now become available.

Question

Quizplus · Accepted Answer

When the price of jeans falls, it becomes cheaper to purchase them. This means that the consumer's budget can now afford more combinations of jeans and t-shirts than before, which were previously unattainable due to budget constraints. As a result, purchases of both jeans and t-shirts increase. This option reflects the rational spending rule of purchasing more of a good when its price falls, which allows the consumer to increase their overall utility.

Assume the Consumer Is Correctly Applying the Rational Spending Rule