Microeconomics Theory - Consumer Behavior
Mr. A and Mr. B both like product Y and product X. The are both endowed with a fix budget, I. Given I, they can choose to consume a combination of product X and Y as long as (Px\(\times\)X)+(Py\(\times\)Y)=I, where Px and Py are prices of both product X and Y. Graphically speaking, if the y-axis represent product Y and x-axis represent product X, the line that connects these two points is the budget constraint line. Question: How will their choices be affected IF the price of good X, Px, were to go down by 1 unit?
Assumption: Mr. A treats both products as complements while Mr. B treats both products as substitutes.
Which of these statements is/are correct?
A. Mr. A buys more product Y, Mr. B buys less product Y
B. Mr. A buys more product X, Mr. B buys more product X
C. Mr. A buys more product Y, Mr. B buys more product Y
D. Mr. A buys less product Y, Mr. B buys less product Y