Joaquin Consumes Pizza and Beer

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 income effect is to increase pizza consumption by ____ pizzas and increase beer consumption by ____ beers.

A) 1.38; 0.28
B) 1.12; 0.28
C) 0.54; 1.04
D) 0.28; 1.38