Gladys Loves Music and Spends Her Money Only on Tapes

Question 46
Multiple Choice

Gladys loves music and spends her money only on tapes and compact discs. She is always willing to trade 2 tapes for 1 compact discs. Originally, music stores sold compact disc for $9 each and tapes for $5 each. Then the price of compact discs fell to $8 each. The change in her consumption of compact discs that resulted was A) entirely due to the substitution effect. B) entirely due to the income effect. C) partly due to the income effect and partly due to the substitution effect. D) due to the income effect for low incomes and the substitution effect for high incomes. E) There was no change in her demand for compact discs.