Chapter 5, Problem 24AA

To determine

To explain: The adjustment of scarce income when rent increases.

Explanation of Solution

The income of a person falls under the category of scarce resources and the problem of scarce resources gives rise to the problem of choice. As mentioned in the question that there is an increase in the family’s rent unexpectedly but income is constant. In this case, the person can cut other expenses in order to compensate for the increased rent. Or the person can search for another house which has lower rent. If the person does not change the house and remains in the same house then the only option is to cut other expenses like removing the housemaid and working all their work by itself.