Justin is a rational consumer who spends his entire income on guitar strings and jasmine tea, both of which he considers normal goods. The table below describes his marginal utility and the prices of guitar strings and
jasmine tea.
MUGS
PGS
$7
PT MUJT
$1 10
70
If the price of guitar strings decreases to $2, which of the following best describes how the substitution effect
will impact how he allocates his budget?
Choose 1 answer.
The relative prices of guitar strings and jasmine tea have changed, guitar strings becoming relatively
cheaper. He will now purchase more of the relatively cheaper guitar strings.
Guitar strings still cost more than jasmine tea, so he will buy more jasmine tea