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Bill spends his money on flowers and cookies so as to maximize his total utility. Both flowers and cookies start off costing $2 each. At that price, Bill buys three flowers and two cookies. When the price of flowers is lowered to $1, Bill buys eight flowers and one cookie. Which of the following statements about Bill's reaction to the price change is NOT true?

User Gdaniel
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1 Answer

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It is not true that Bill's total expenditure on flowers increased after the price change.

When the price of flowers was lowered from $2 to $1, Bill increased his quantity of flowers from three to eight, but he also decreased his quantity of cookies from two to one. As a result, his total expenditure on flowers did not necessarily increase.

Instead, the price change may have resulted in an increase or decrease in Bill's total expenditure depending on the relative changes in the quantities of flowers and cookies he bought, and the corresponding changes in the total cost of each item.

To determine the effect of the price change on Bill's total expenditure, we would need to calculate his total expenditure before and after the price change and compare the two.

User Vladislav Kovalyov
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