Question

1. Amrita, a utility maximizing consumer, consumes only two normal goods,
Breakfast Cereal and Bread Loaf. She is currently consuming 12 packets of
Cereal and 16 bread loafs a week. If the price of Cereal increases (and
everything else stays the same) we would expect Amrita to consume fewer
bread loafs per week. Do you agree? Why/Why not?

Answer 1

Yes I agree that Amrita will be inclined to consume fewer bread loafs per week since she is a  utility maximizing and she will decide to allocate her money incomes so that the last dollar spent on each product purchased yields the same amount of extra marginal utility