Consider the consumer in question 4, with utility function over x1 and x2: u(x1, x2) = = x1x2.5 The price of good 1 is p1=1; the price of good 2 is p2=2; and income is m=24. Suppose now that the income doubles to 48. Indicate which of the following statements is true. Select one: O Demand for good 1 remains constant. O Demand for good 2 decreases. O Both goods are normal goods and hence the income expansion path has a positive slope. O Both goods are normal goods and hence the income expansion path has a negative slope. O None of the statements is true. 4
Consider the consumer in question 4, with utility function over x1 and x2: u(x1, x2) = = x1x2.5 The price of good 1 is p1=1; the price of good 2 is p2=2; and income is m=24. Suppose now that the income doubles to 48. Indicate which of the following statements is true. Select one: O Demand for good 1 remains constant. O Demand for good 2 decreases. O Both goods are normal goods and hence the income expansion path has a positive slope. O Both goods are normal goods and hence the income expansion path has a negative slope. O None of the statements is true. 4
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![GE
Consider the consumer in question 4, with utility function over x1 and x2:
u(x₁, x₂) = x₁x2.5
x2):
The price of good 1 is p1=1; the price of good 2 is p2=2; and income is m=24. Suppose now that the income doubles to 48.
Indicate which of the following statements is true.
Select one:
O Demand for good 1 remains constant.
O Demand for good 2 decreases.
O Both goods are normal goods and hence the income expansion path has a positive slope.
O Both goods are normal goods and hence the income expansion path has a negative slope.
O None of the statements is true.
A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe8a6f34c-6199-4e45-a690-3a492ff2db75%2F8689e17d-6ecb-41cc-85ae-243e44b3036d%2Fjkdg6rn.jpeg&w=3840&q=75)
Transcribed Image Text:GE
Consider the consumer in question 4, with utility function over x1 and x2:
u(x₁, x₂) = x₁x2.5
x2):
The price of good 1 is p1=1; the price of good 2 is p2=2; and income is m=24. Suppose now that the income doubles to 48.
Indicate which of the following statements is true.
Select one:
O Demand for good 1 remains constant.
O Demand for good 2 decreases.
O Both goods are normal goods and hence the income expansion path has a positive slope.
O Both goods are normal goods and hence the income expansion path has a negative slope.
O None of the statements is true.
A
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