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For M > P2, the Demand Functions for Goods 1

Question 42

Multiple Choice

For m > p2, the demand functions for goods 1 and 2 are given by the equations, x1 = m/p2 - 1 and x2 = p1/p2, where m is income and p1 and p2 are prices.Let the horizontal axis represent the quantity of good 1.Let p1 = 1 and p2 = 2.Then for m > 2, the income offer curve is


A) a vertical line.
B) a horizontal line.
C) a straight line with slope 2.
D) a straight line with a slope of 1/2.
E) None of the above.

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