Question

Suppose that a consumer only gets utility from the consumption of x1 and gets no utility from the consumption of x2. This consumer has an initial endowment for each good of (𝑥1,𝑥2)=(10,10). If the prices for each good change from (𝑝1,𝑝2)=(5,5)

to (𝑝1,𝑝2)=(7,5) will this consumer be made better off or worse off? 

Choose one:

A. worse off

B. better off

C. no change

D. unable to determine from information given

Answer 1

A. Worse off.

The consumer will have to incur an extra cost in order to acquire the good that he gets utility from consuming it.