Graph 22-3
-Refer to Graph 22-3.Suppose that these budget lines exist for the same consumer who faced the same budget constraint in both panels.What can we infer about the prices of the two goods?
A)the price of Y in panel a is higher than the price of Y in panel b
B)the prices of both X and Y are lower in panel a
C)the price of X in panel a is higher than the price of X in panel b
D)none of the above are true

Question

Graph 22-3 
-Refer to Graph 22-3.Suppose that these budget lines exist for the same consumer who faced the same budget constraint in both panels.What can we infer about the prices of the two goods?
A)the price of Y in panel a is higher than the price of Y in panel b 
B)the prices of both X and Y are lower in panel a 
C)the price of X in panel a is higher than the price of X in panel b 
D)none of the above are true

Quizplus · Accepted Answer

In panel a, the budget line is steeper which means that the relative price of X is higher compared to Y. This implies that the price of X is higher in panel a compared to panel b. Therefore, option C is correct. Option A is incorrect because there is no information about the price of Y. Option B is incorrect because there is no evidence to suggest that the prices of both goods have decreased. Option D is incorrect because option C is true.

Graph 22-3 -Refer to Graph 22-3.Suppose That These Budget Lines Exist for Lines