Multiple Choice
Charlie's utility function is xAxB.The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40.If the price of apples increased to $6 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by
A) 16.67 apples.
B) 5 apples.
C) 8.33 apples.
D) 13.33 apples.
E) None of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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