Holly consumes x and y.The price of x is 4 and the price of y is 4.Holly's only source of income is her endowment of 6 units of x and 6 units of y which she can buy or sell at the going prices.She plans to consume 7 units of x and 5 units of y.If the prices change to $7 for x and $7 for y,
A)she is better off.
B)she is worse off.
C)she is neither better off nor worse off.
D)she is better off if she has nonconvex preferences.
E)We can't tell whether she is better off or worse off unless we know her utility function.

Question

Quizplus · Accepted Answer

Holly's budget constraint remains the same because both her endowment and consumption plans are affected equally by the price change.

Holly Consumes X and Y