The slope of the consumption function is equal to the level of autonomous consumption
Indicate whether the statement is true or false
FALSE
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Assume a consumer is currently purchasing a combination of goods, X and Y, that maximizes her utility given her budget constraint, i.e., MRSX,Y = PX/PY. Now assume that there is a decrease in the price of Y
In this case, to once again maximize her utility, the consumer will want to adjust her purchases of X and Y such that: A) the marginal rate of substitution of X for Y, i.e., MRSX,Y, decreases. B) the marginal rate of substitution of X for Y, i.e., MRSX,Y, stays the same. C) the marginal rate of substitution of X for Y, i.e., MRSX,Y, increases. D) none of the above. The consumer will continue to maximize her utility after the price change by continuing to consume the same combination of X and Y.
Rebecca consumes both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup. Which of the following marginal utility pairs is consistent with Rebecca's consumer equilibrium at these prices?
a. MU of iced tea = 1; MU of coffee = 1 b. MU of iced tea = 1; MU of coffee = 2 c. MU of iced tea = 2; MU of coffee = 3 d. MU of iced tea = 3; MU of coffee = 4