Goods X and Y

For the following questions, assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.

-Refer to Goods X and Y.When the price of good X rises,what happens to the budget line?
A) The budget line shifts in,with no change in the slope.
B) The budget line becomes flatter,and the horizontal intercept moves to the right.
C) The budget line becomes steeper,with no change in the vertical intercept.
D) The budget line pivots about the horizontal intercept,with the vertical intercept moving up.

Question

Goods X and Y

For the following questions, assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.

-Refer to Goods X and Y.When the price of good X rises,what happens to the budget line?
A) The budget line shifts in,with no change in the slope.
B) The budget line becomes flatter,and the horizontal intercept moves to the right.
C) The budget line becomes steeper,with no change in the vertical intercept.
D) The budget line pivots about the horizontal intercept,with the vertical intercept moving up.

Quizplus · Accepted Answer

When the price of good X rises, the budget line becomes steeper. This is because the amount of good Y that can be purchased with the given budget decreases relative to the increase in the price of good X. The vertical intercept remains the same because it represents the maximum amount of good Y that can be purchased at the initial price of good X.