Waldo consumes only apples and bananas and bananas are an inferior good for him. The price of apples increases, but there is an increase in his income that keeps him on the same indifference curve as before. (Waldo has convex preferences, and he prefers more to less of either good.)

a After the change, Waldo will buy fewer of both goods.

b After the change, Waldo will buy more of both goods.

c After the change, Waldo will buy more bananas and fewer apples.

d After the change, Waldo will buy fewer bananas and more apples.

e We would need to know his utility function to determine whether any of the above statements are true.

Question

Business

Banjo

19 March, 13:57

Waldo consumes only apples and bananas and bananas are an inferior good for him. The price of apples increases, but there is an increase in his income that keeps him on the same indifference curve as before. (Waldo has convex preferences, and he prefers more to less of either good.)

a After the change, Waldo will buy fewer of both goods.

b After the change, Waldo will buy more of both goods.

c After the change, Waldo will buy more bananas and fewer apples.

d After the change, Waldo will buy fewer bananas and more apples.

e We would need to know his utility function to determine whether any of the above statements are true.

+2

Answers (1)

Know the Answer?

Saul Bass · Answer 1

The correct answer to this question is option C

Explanation:

Solution

Any difference curve will show all the combinations of goods that gives the consumer the same level of utility or same level of satisfaction.

For this, after the change Waldo will by more bananas and few apples

From the given question, The right answer here is option C