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Question
Javon is consuming his optimal utility-maximizing consumption bundle of lobster and macaroni-and-cheese dinners. Call this bundle A. His income is $100, the price of a macaroni-and-cheese dinner is $5, and the price of a lobster is $20. Put lobsters on the vertical axis and put macaroni-and-cheese dinners on the horizontal axis. His income increases to $500 and the prices of macaroni-and-cheese dinners and lobster remain constant. With the increase in income, Javon changes his consumption of the two goods and now maximizes utility at bundle B. If macaroni-and-cheese dinners are an inferior good for Javon:A) at bundle B, Javon consumes more macaroni-and-cheese dinners.
B) at bundle B, Javon consumes less lobster.
C) at bundle A and bundle B, the marginal utility of lobster is 5.
D) at bundle B, Javon consumes more lobster.
Answer
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