Steven consumes staples and paper clips.He is maximizing his utility in consumption of both goods.The price of staples falls.After the change in price,Steven should consume _____ staples and _____ paper clips.
A)more;more
B)more;fewer
C)fewer;fewer
D)fewer;more

Question

Quizplus · Accepted Answer

When the price of staples falls, Steven can afford to buy more staples for the same amount of money, leading to an increase in the consumption of staples due to the substitution effect. Additionally, because staples have become cheaper, Steven effectively has more purchasing power, which can lead to an increase in overall consumption (income effect). However, if Steven reallocates some of his budget to buy more staples, he might reduce the amount spent on paper clips, leading to fewer paper clips being consumed.

Steven Consumes Staples and Paper Clips