Suppose a consumer buys two goods, $x$ and $y$ and has income of $30. Initially P_x = 3 and P_y = 3 and the consumer chooses basket $A$ with x = 7 and y = 3. The prices change to P_x = 4 and P_y = 2 and the consumer chooses basket $B$ with x = 5 and y = 5. A) These choices are consistent with utility maximization. B) These choices are not consistent with utility maximization. C) With this information it is not possible to determine if these choices are consistent with utility maximization. D) Basket B must be preferred to basket A.

Question

Quizplus · Accepted Answer

The consumer is maximizing utility given their income and the prices of the goods. The choices made for both baskets are affordable and the consumer is choosing the basket that gives them the highest utility given the new prices. Therefore, these choices are consistent with utility maximization.

Suppose a Consumer Buys Two Goods xxx And yyy And Has Income of $30

Suppose a Consumer Buys Two Goods $x$ And $y$ And Has Income of $30