Steven consumes staples and paper clips.He is maximizing his utility in consumption of both goods.The price of staples falls.Assuming that diminishing marginal utility applies to both goods,as Steven adjusts to this event,the marginal utility of staples will _____,and the marginal utility of paper clips will _____.
A)rise;fall
B)rise;rise
C)fall;fall
D)fall;rise

Question

Quizplus · Accepted Answer

When the price of staples falls, Steven will consume more staples due to the substitution effect, leading to a decrease in the marginal utility of staples due to diminishing marginal utility. As he reallocates his budget, consuming fewer paper clips and more staples, the marginal utility of paper clips will rise because he is consuming less of them, and diminishing marginal utility implies that less consumption increases marginal utility.

Steven Consumes Staples and Paper Clips