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Joe's Utility Function Is Given by U(x,y)= Min[x,y]

Question 8

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 zero.
B) the substitution effect exceeds the income effect.
C) the income effect is zero.
D) the total effect is zero.

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