Figure 21-17
-Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point
A)A.
B)B.
C)D.
D)E.

Question

Figure 21-17 
-Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point
A)A. 
B)B. 
C)D. 
D)E.

Quizplus · Accepted Answer

When the price of Y decreases to $6, Paul's new budget constraint line rotates inward and becomes flatter. This means that he will consume more of both goods. His new optimal choice will be where the new budget constraint line intersects with his highest indifference curve, which is at point D.

Figure 21-17 -Refer to Figure 21-17. When the Price of X Is