The diagram below shows a set of budget lines facing a household. FIGURE 6- 7
-Refer to Figure 6- 7. The movement of the budget line from ab to ac could be caused by
A) an increase in the price of food.
B) a decrease in the price of housing.
C) a decrease in the price of food.
D) an increase in money income.
E) an increase in the price of housing.

Question

The diagram below shows a set of budget lines facing a household.  FIGURE 6- 7
-Refer to Figure 6- 7. The movement of the budget line from ab to ac could be caused by
A) an increase in the price of food. 
B) a decrease in the price of housing. 
C) a decrease in the price of food. 
D) an increase in money income. 
E) an increase in the price of housing.

Quizplus · Accepted Answer

The movement of the budget line from ab to ac shows an increase in purchasing power, which could be caused by a decrease in the price of food. This causes the household to be able to afford more food and still have the same amount of money left over for other goods.

The Diagram Below Shows a Set of Budget Lines Facing