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Jack's income consumption curve for coffee is a vertical line on an optimal choice diagram, with coffee on the horizontal axis and other goods on
Jack's income consumption curve for coffee is a vertical line on an optimal choice diagram, with coffee on the horizontal axis and other goods on the vertical axis. When the price of coffee drops from $3 to $2 per cup, the change in Jack's consumer surplus $20 per month. What can we say about Jack's demand curve and well-being measures?
- A.His demand curve is vertical, and equivalent variation = $20 = compensating variation
- B.His demand curve is down-ward sloping, and equivalent variation > $20 > compensating variation
- C.His demand curve is vertical, and equivalent variation > $20 > compensating variation
- D.His demand curve is down-ward sloping, and equivalent variation = $20 = compensating variation
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