Question

Given below are two statements :
Statement-I: Let (x1, x2) be the chosen bundle when prices are (p1, p2) and let (y1, y2) is some other bundle such that p1x1+p2x2 ≥ p1y1+ p2y2. Then if the consumer is choosing the most preferred bundle she can afford, we must have (x1, x2)>(x1,x2).
Statement-II: If one bundle is chosen when another could have been chosen, we can say that the first bundle is revealed preferred to the second.
In the light of the above statements, choose the correct answer from the options given below:

• A. Both Statement I and Statement II are true
• B. Both Statement I and Statement II are false
• C. Statement I is true but Statement II is false
• D. Statement I is false but Statement II is true

Answer 1

Answer: (A)

Both Statement I and Statement II are true

Answer 2

The correct answer is (A) : Both Statement I and Statement II are true.