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

Question

Quizplus · Accepted Answer

When the price of staples rises, Steven's overall budget constraint tightens, assuming his income and the price of paper clips remain constant. This means he has less purchasing power to allocate between the two goods. In order to maximize his utility, he should decrease his consumption of the now more expensive staple and increase consumption of the relatively cheaper paper clip. Therefore, he should consume fewer staples and more paper clips, as indicated by choice C.

Steven Consumes Staples and Paper Clips