If the price of apples falls and the price of oranges remains constant:
A) apples are now relatively cheaper.
B) the fall in the price of apples made consumers richer.
C) the fall in the price of apples, ceteris paribus, makes the marginal utility of apples divided by their price exceed the marginal utility of oranges divided by their price.
D) all of the above statements are true.

Question

Quizplus · Accepted Answer

All statements are correct. A) The relative price of apples decreases compared to oranges. B) Consumers experience an increase in purchasing power or a form of income effect due to the price drop. C) The principle of marginal utility per dollar spent implies that apples become a more attractive purchase compared to oranges when their price falls, assuming other factors remain constant (ceteris paribus).

If the Price of Apples Falls and the Price of Oranges