Table 6.5
-Refer to Table 6.5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for burgers and sushi rolls.Assume that the price of the burgers is $4 and the price of sushi rolls is $2.When Harry's income is $14 he buys two burgers and three sushi rolls.The last column lists the values of the marginal utility per dollar for sushi rolls when the price of sushi rolls decreases to $1.Complete this statement: As a result of the change in price,
A)Harry's purchasing power has increased.He will reduce his consumption of sushi rolls so he can buy one more burger.This is an example of the substitution effect of a price change.
B)Harry's purchasing power has increased.If sushi rolls are a normal good for Harry, he will buy fewer sushi rolls.This is an example of the income effect of a price change.
C)Harry's purchasing power has increased.If sushi rolls are a normal good for Harry he will buy more sushi rolls.This is an example of the income effect of a price change.
D)Harry's purchasing power has increased.Harry buys fewer sushi rolls.This is an example of the substitution effect of a price change.

Question

Table 6.5 
-Refer to Table 6.5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for burgers and sushi rolls.Assume that the price of the burgers is $4 and the price of sushi rolls is $2.When Harry's income is $14 he buys two burgers and three sushi rolls.The last column lists the values of the marginal utility per dollar for sushi rolls when the price of sushi rolls decreases to $1.Complete this statement: As a result of the change in price,
A)Harry's purchasing power has increased.He will reduce his consumption of sushi rolls so he can buy one more burger.This is an example of the substitution effect of a price change. 
B)Harry's purchasing power has increased.If sushi rolls are a normal good for Harry, he will buy fewer sushi rolls.This is an example of the income effect of a price change. 
C)Harry's purchasing power has increased.If sushi rolls are a normal good for Harry he will buy more sushi rolls.This is an example of the income effect of a price change. 
D)Harry's purchasing power has increased.Harry buys fewer sushi rolls.This is an example of the substitution effect of a price change.

Quizplus · Accepted Answer

When the price of sushi rolls decreases, Harry's purchasing power increases, allowing him to buy more of the sushi rolls if they are a normal good for him. This change in consumption due to the increased purchasing power is known as the income effect of a price change.

Table 6.5 -Refer to Table 6.5, Which Lists the Values of Harry