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Shauna has $10 for the purchase of pens and pencils. The cost of each pen is $2, and the cost of a pencil is $1.
Shauna has $10 for the purchase of pens and pencils. The cost of each pen is $2, and the cost of a pencil is $1. We assume that Shauna will purchase the two goods such that the utility maximizing condition is satisfied. Shauna buys 3 pens and 4 pencils. If the price of a pen falls to $1 each, then the substitution effect would require that Shauna:
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