If a consumer is choosing the optimal combinations of two goods X and Y, and then the price of good Y decreases, this causes
A) MU/P of good X to increase, so the consumer now should buy more X to find a new optimal combination
B) demand for good X to increase
C) MU/P of good Y to increase, so the consumer now should buy more Y to find a new optimal combination
D) MU/P of good Y to decrease, so the consumer now should buy more Y to find a new optimal combination
E) the demand for good X and good Y will not change because utility does not depend on price

Question

Quizplus · Accepted Answer

When the price of good Y decreases, the marginal utility per dollar (MU/P) of good Y increases, making it more attractive for the consumer to buy more of good Y to reach a new optimal combination of goods.

If a Consumer Is Choosing the Optimal Combinations of Two