Question

Tracy, a utility-maximizing individual with standard (bowed-in toward the origin) indifference

curves, consumes only two goods: pizza and soda. What must happen to her consumption of soda
if the price of soda falls?

Answer 1

If the price of soda drops, and Tracy only consumes two goods (soda and pizza), what is likely to happen is that, due to the law of supply and demand, the lower the price, the higher the demand for the good. Thus, if soda drops in price, Tracy will seek to purchase larger quantities of said product, taking advantage of the drop in price to increase its stock levels.