Charlie’s utility function is xAxB. The price of apples used to be $1, the price of bananasused to be $2, and his income used to be $40.

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Charlie’s utility function is xAxB. The price of apples used to be $1, the price of bananasused to be $2, and his income used to be $40. If the price of apples increased to $4 andthe price of bananas stayed constant, the substitution effect on Charlie’s apple consumptionwould reduce his consumption by

(a) 15 apples(b) 3 apples(c) 7.50 apples(d) 12.50 apples(e) None of the above.

why is the answer C correct?

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