Exhibit 21-8

-Refer to Exhibit 21-8.A move of the budget constraint from 2 to 3 is caused by a
A) rise in the price of good X.
B) fall in the price of good X.
C) rise in the price of good Y.
D) fall in income.

Question

Exhibit 21-8
 
-Refer to Exhibit 21-8.A move of the budget constraint from 2 to 3 is caused by a
A) rise in the price of good X. 
B) fall in the price of good X. 
C) rise in the price of good Y. 
D) fall in income.

Quizplus · Accepted Answer

Moving the budget constraint from 2 to 3 represents a decrease in the price of good X, which would allow the consumer to purchase more of good X for the same amount of income and price of good Y. A rise in the price of good X or Y, or a fall in income, would result in a shift of the budget constraint in a different direction.

Exhibit 21-8 -Refer to Exhibit 21-8.A Move of the Budget Constraint from the Budget