Calculate the juan consumption of good

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Reference no: EM132197807

Question: Juan has preferences that satisfy more is better on bundles of two goods (x,y). In the market situation in which his income is Y=$100 and prices of both goods are equal to $5, Juan consumes the same amount of both goods. When the price of good x decreases by 20%, all the other equal, Juan's substitution effect is 0.5 units and his income effect is 3.5 units. Then, Juan's consumption of good y?

Drops by 20%.

Drops by 22%.

Increases by 25%.

Increases by 20%.

Drops by 18%.

Reference no: EM132197807

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