Suppose that a consumer's preferences are well behaved in that properties 4-1 - 4-4 are satisfied and the initial budget constraint is given by 300 = 2X + 4Y.At the initial budget constraint, this consumer purchases 100 units of good X and 25 units of good Y.Suppose the price of X increases to $4 per unit resulting in a new consumption bundle consisting of 60 units of X and 15 units of Y.Then, slope of the inverse demand for good X over this consumption range is
A)0.05.
B)-0.05.
C)-0.267.
D)-0.444.

Question

Quizplus · Accepted Answer

The slope of the inverse demand for good X is calculated as the change in price divided by the change in quantity. The price of X increased from $2 to $4, and the quantity of X decreased from 100 to 60. Thus, the slope is (4-2)/(60-100) = 2/-40 = -0.05.

Suppose That a Consumer's Preferences Are Well Behaved in That