Question
F are units of food, and S are units of shelter (housing). Consumers in BigCity have preferences over food and housing that are summarized by
F are units of food, and S are units of shelter (housing). Consumers in BigCity have preferences over food and housing that are summarized by U(F,S)=FaSb. The price of food is pF and the price of shelter is pS. Which of the following statements is true:
Select one:
a.
As housing gets more expensive relative to the price of food, but incomes stay the same, people in BigCity spend more on food.
b.
If incomes fall, people in BigCity will spend less on shelter but more on food.
c.
If incomes and price of food both double, but the price of shelter stays the same, people in BigCity buy twice as much housing but the same quantity of food.
d.
The number of units of food and housing bought in BigCity are a constant share of income.
e.
None of the above
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