Solved

Sam Has $200 a Month to Spend on Either Tanning

Question 27

Multiple Choice

Sam has $200 a month to spend on either tanning sessions or rounds of golf.Tanning sessions are $20 each,and a round of golf is $40.Sam currently consumes six tanning sessions and two rounds of golf.Both tanning and golf are normal goods.If the price of a round of golf drops to $20,the income and substitution effects will cause Sam's consumption of tanning sessions:


A) to increase, since both effects predict an increase.
B) to decrease, since both effects predict a decrease.
C) to change, but the direction is dependent upon which effect is stronger.
D) It is impossible to say what will happen without more information.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions