100
Correct! We do not know how sensitive Evan is to changes in prices, since prices have not changed in this example. Therefore, we know that statement (a) is false. Given that the only change we are considering is a change in income, the proportion Evan spends on each good is determined by the relative prices of the two goods, which have not changed. Accordingly, statement (c) is true. While these proportions (before and after the income change) are constant, we do not know that they are equal. Accordingly, we cannot conclude the Evan’s additional spending on vacations is equal to his additional spending on fancy meals, and statement (b) is false.
Incorrect! We do not know how sensitive Evan is to changes in prices, since prices have not changed in this example. Therefore, we know that statement (a) is false. Given that the only change we are considering is a change in income, the proportion Evan spends on each good is determined by the relative prices of the two goods, which have not changed. Accordingly, statement (c) is true. While these proportions (before and after the income change) are constant, we do not know that they are equal. Accordingly, we cannot conclude the Evan’s additional spending on vacations is equal to his additional spending on fancy meals, and statement (b) is false.