Question

Matt's ordinary demand function for commodity x1(p1, p2, I)=(3I)/p1. How will a 1% increase in p1 affect Matt's expenditures on x1 (use our approximization formula here)?
(A) His expenditure on x1 will increase by 1%
(B) His expenditures on x1 will not change.
(C) His expenditures on x1 will decrease by 1%.
(D) It is not possible to determine how Matt's expenditures will change from the information given.

Answer 1

Answer : The answer is option D.