Suppose that a consumer's preferences are well behaved in that properties 4-1 to 4-4 are satisfied and the initial equilibrium consumption bundle consists of 10 units of X and 25 units of Y.If P_Y increases such that the new equilibrium consumption bundle is 15 units of X and 10 units of Y,then goods X and Y are: A) complements. B) substitutes. C) normal goods. D) unrelated.

Question

Quizplus · Accepted Answer

If the increase in P_Y leads to an increase in the consumption of good X then good X and good Y are substitutes. In the given scenario, an increase in the price of good Y leads to an increase in the consumption of good X, which implies that they are substitutes. Therefore, the correct answer is (B) substitutes.

Suppose That a Consumer's Preferences Are Well Behaved in That