Donald derives utility from only two goods, carrots (X) and donuts (Y). His utility function is as follows: U(X,Y) =X0.1 YO.9. Donald has an income (M) of $900 and the price of carrots (PX) and donuts (PY) are $45 and $90 respectively. How will the bundle change when the price of carrot increased by $25 and the price of donut and income remain constant? Select one: A. Donald will now consume 1 unit of carrot and 10 units of donuts B. Donald will now consume 1.3 units of donuts and 9.3 units of carrots C. Donald will now consume 2 units of carrot and 2 units of donuts D. Donald will now consume 2 units of carrot and 6 units of donuts E. Donald will now consume 2 units of carrot and 3 units of donuts F. Donald will now consume 1.3 units of carrots and 9.3 units of donuts G. Donald will now consume 3 units of carrot and 2 units of donuts H. Donald will now consume 1 unit of carrot and 1 unit of donuts

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Revealed Preferences and Budget Constraint Analysis

Revealed means “Let Out,” and Preference means “Choice”; Choice Reveals Preference.