Sam is maximizing his utility with a consumption bundle of 5 cookies, 10 DVDs, and 2 cheeseburgers. If the price of DVD's decreases, then
A) Sam will continue to buy the same number of each good.
B) Sam will tend to buy more DVDs
C) Sam will tend to buy more cookies.
D) Sam will tend to buy more cheeseburgers.

Question

Quizplus · Accepted Answer

When the price of DVDs decreases, Sam's budget constraint will shift outward, allowing him to purchase more DVDs while still being able to afford the same amount of cookies and cheeseburgers as before. Therefore, Sam will tend to buy more DVDs.

Sam Is Maximizing His Utility with a Consumption Bundle of 5