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    Question

    There are three commodities –the first commodity has a negative price, at −1 per unit; the second commodity is priced at +1 per unit while the third is priced at +2 per unit. Income of the person is Rs. 100 per day. Then which one of the following is not true?

    A An individual may afford to consume positive amounts of each per day Correct Answer Incorrect Answer
    B An individual may afford to consume any amounts of goods 2 and 3 per day Correct Answer Incorrect Answer
    C Any individual may afford to consume (0, 0, 60) Correct Answer Incorrect Answer
    D An individual may afford to consume (20, 0, 60) Correct Answer Incorrect Answer

    Solution

    Solution If the consumer is consuming zero units of both first and second commodity and 60 units of third commodity, then it means that to consume 60 units of third commodity he will need Rs  120 (60× 2). Since the income of the consumer is only Rs. 100 per day, therefore he will not be able to consume 60 units with his given income. Therefore (c) is definitely not true.

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