Multiple Choice
Joe's utility function is given by U(x,y) = min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:
A) the substitution effect is equal to 3.
B) the substitution effect is equal to 2.
C) the substitution effect is zero.
D) the substitution effect is equal to 1.
Correct Answer:
Verified
Correct Answer:
Verified
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