Use the following to answer questions :
-(Figure: Kristin's Budget Line)Use Figure Kristin's Budget Line.The price of a cup of cappuccino is $3,and the price of an apple is $1.Suppose Kristin initially consumes 10 cups of cappuccino and 30 apples.Then the price of apples increases to $3 each and the price of cappuccino remains unchanged.As a result of this price change,Kristin's optimal consumption bundle is now nine cups of cappuccino and 11 apples.If Kristin's income could be adjusted so that she could maintain her initial level of utility after the price change,she would consume more cappuccino and more apples.This reflects:
A) a substitution effect from the price change and an income effect from the income change.
B) the substitution effect alone.
C) the income effect alone.
D) neither a substitution nor an income effect.

Question

Use the following to answer questions : 
-(Figure: Kristin's Budget Line)Use Figure Kristin's Budget Line.The price of a cup of cappuccino is $3,and the price of an apple is $1.Suppose Kristin initially consumes 10 cups of cappuccino and 30 apples.Then the price of apples increases to $3 each and the price of cappuccino remains unchanged.As a result of this price change,Kristin's optimal consumption bundle is now nine cups of cappuccino and 11 apples.If Kristin's income could be adjusted so that she could maintain her initial level of utility after the price change,she would consume more cappuccino and more apples.This reflects:
A) a substitution effect from the price change and an income effect from the income change. 
B) the substitution effect alone. 
C) the income effect alone. 
D) neither a substitution nor an income effect.

Quizplus · Accepted Answer

The Answer of Use the following to answer questions : 
-(Figure: Kristin's Budget Line)Use Figure Kristin's Budget Line.The price of a cup of cappuccino is $3,and the price of an apple is $1.Suppose Kristin initially consumes 10 cups of cappuccino and 30 apples.Then the price of apples increases to $3 each and the price of cappuccino remains unchanged.As a result of this price change,Kristin's optimal consumption bundle is now nine cups of cappuccino and 11 apples.If Kristin's income could be adjusted so that she could maintain her initial level of utility after the price change,she would consume more cappuccino and more apples.This reflects:
A) a substitution effect from the price change and an income effect from the income change. 
B) the substitution effect alone. 
C) the income effect alone. 
D) neither a substitution nor an income effect.

Use the Following to Answer Questions