Andrew's Utility Function Is U(xs1u1b11s1u1b0, Xs1u1b12s1u1b0) = 4xs1u1p12s1s1p0s1u1b11s1u1b0 + Xs1u1b12s1u1b0

Question 43
Multiple Choice

Andrew's utility function is U(x1, x2) = 4x21 + x2. Andrew's income is $32, the price of good 1 is $16 per unit, and the price of good 2 is $1 per unit. What happens if Andrew's income increases to $80 and prices do not change? (Hint: Does he have convex preferences?) A) He will consume 48 more units of good 2 and the same number of units of good 1 as before. B) He will increase his consumption of both goods. C) He will reduce his consumption of good 2. D) He will consume the same number of units of good 2 and 3 more units of good 1 as before. E) None of the above.