Assume that goods X and Y are not Giffen goods. If the price of good X falls, a consumer will definitely
A)consume more of good X because her budget constraint has rotated outward.
B)consume more of good X because her budget constraint has shifted outward.
C)consume more of good Y because her budget constraint has rotated outward.
D)consume more of good Y because her budget constraint has shifted outward.

Question

Assume that goods X and Y are not Giffen goods. ​If the price of good X falls, a consumer will definitely
A)​consume more of good X because her budget constraint has rotated outward.
B)consume more of good X because her budget ​constraint has shifted outward.
C)​consume more of good Y because her budget constraint has rotated outward.
D)​consume more of good Y because her budget constraint has shifted outward.

Quizplus · Accepted Answer

When the price of good X falls, the consumer's budget constraint rotates outward, allowing them to afford more of good X, assuming it is not a Giffen good.

Assume That Goods X and Y Are Not Giffen Goods