Multiple Choice
Joaquin consumes pizza and beer. His utility function is 
where P is the number of pizzas and B is the number of glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today. The price of one pizza is $10, and the price of beer is $3 per glass. Joaquin is allowed to purchase fractions of a pizza by buying individual slices at the same average price (thus, one quarter of a pizza would cost $2.50) . Suppose the price of beer decreases to $2. The substitution effect is to decrease pizza consumption by ____ pizzas and increase beer consumption by ____ beers.
A) 1.12; 0.28
B) 1; 1
C) 0.54; 1.04
D) 0.28; 1.12
Correct Answer:
Verified
Correct Answer:
Verified
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