Mary has homothetic preferences.When her income was $1,000, she bought 40 books and 60 newspapers.When her income increased to $1,500 and prices did not change, she bought

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Homothetic preferences imply that when income changes, consumers change their consumption in the same proportion for all goods, maintaining the same consumption bundle ratio. Mary's original ratio of books to newspapers is 40:60 or 2:3. When her income increases by 50% (from $1,000 to $1,500), her consumption of both goods should also increase by 50%, maintaining the 2:3 ratio. Therefore, she would buy 60 books (40 * 1.5) and 90 newspapers (60 * 1.5).

Mary Has Homothetic Preferences