- Incorrect Question 1 0 1 Pts Shep Consumes Two Goods X And Y Each Unit Of X Costs 3 While Each Unit Of Y Costs 2 S 1 (116.62 KiB) Viewed 36 times
Incorrect Question 1 0 / 1 pts Shep consumes two goods X and Y. Each unit of X costs $3 while each unit of Y costs $2. Shep has $40 at his disposal to spend. Shep's preferences are such that he gets the same amount of utility for each additional unit of X he consumes and each additional unit of Y he consumes. So, as far as Shep is concerned goods X and Y are perfect substitutes. Due to supply disruptions, the prices of both Goods X and Y have gone up such that each unit of Good X now costs $4 while each unit of Good Y costs $4 as well. Which of the following statements is CORRECT? Initially, prior to the price increase, Shep's indifference curves are flatter than the budget constraint. In maximizing utility, Shep will consume 20 units of Good Y. Following the price increase, Shep's indifference curves become steeper than the budget constraint and he will consume 10 units of Good X. Initially, prior to the price increase, Shep's indifference curves are flatter the budget constraint. In maximizing utility, Shep will consume 20 units of Good Y. Following the price increase, the slopes of the indifference curves and the budget constraint become equal (and equal to one) and Shep may consume 10 units of Good Yand zero of Good X; 10 units of Good X and zero of Good Y or any combination of X and Y in between that satisfies the budget constraint. Initially, prior to the price increase, Shep's indifference curves are steeper than the budget constraint. In maximizing utility, Shep will consume 13.33 units of Good X. Following the price increase, Shep's indifference curves become flatter than the budget constraint and he will consume 10 units of Good Y. Initially, prior to the price increase, Shep's indifference curves are flatter than the budget constraint. In maximizing utility, Shep will consume 20 units of Good X. Following the price increase, Shep's indifference curves become steeper than the budget constraint and he will consume 20 units of Good Y.