Question
The price of widgets is $20 per unit. At this price, the consumer buys 10 units of widgets and spend the rest of his money
The price of widgets is $20 per unit. At this price, the consumer buys 10 units of widgets and spend the rest of his money on all other goods.
Now suppose that the consumer is offered the following deal: The price of widgets is $20 per unit for the first 10 units, but becomes $15 once the purchase exceeds 10 units (but the first 10 units still cost $20 per unit). What will happen to this consumer's consumption of widgets as well as expenditure on all other goods? Assume that this consumer's preferences are "standard."
Please select one:
a.
Widget consumption rises; Expenditure on all other goods falls.
b.
Widget consumption rises; Expenditure on all other goods rises.
c.
Widget consumption stays the same; Expenditure on all other goods stays the same.
d.
Widget consumption rises; Expenditure on all other goods may rise, fall or stay the same.
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