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?

Q: Answer-There are three commodities –the first commodity has a negative price, at −1 per unit; the second co...

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.