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    Actual consumption of goods

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    2.An elderly consumer's only income is his monthly Social Security check. Last year, food cost $5 and clothing cost $10 per unit, and he bought 100 units of food and 25 units of clothing each month, exhausting his monthly Social Security check of $750. This year, the price of food is $8 and the price of clothing is $12. So that he can afford the combination of food and clothing he purchased last year, the Social Security Administration has raised his monthly check to $1100. How might the consumer adjust the amounts of food and clothing he buys this year? Will he be better off, equally well off, or worse off this year in comparison with last year?

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    Solution Preview

    Last year the person spent $750 and bought 100 units of food, and 25 units of clothing. Each unit of food cost $5, and each unit of clothing cost $10, thus the person spent all his money in the process. ...

    Solution Summary

    Actual consumption of goods is assessed clearly from this case.