A change in the price of the good measured on the horizontal axis changes ________ of the budget line.
A)the slope and y-intercept
B)the slope and x-intercept
C)the x- and y-intercepts but not the slope
D)only the slope
E)only the y-intercept

Question

Quizplus · Accepted Answer

A change in the price of the good on the horizontal axis would affect the slope of the budget line, as it is determined by the ratio of the prices of the two goods. It would also affect the x-intercept, as the quantity that can be purchased of the good on the horizontal axis would change at every price level. The y-intercept, however, represents the maximum quantity that can be purchased of the other good, given the available income, and would not be affected by a change in the price of the good on the horizontal axis.

A Change in the Price of the Good Measured on the Horizontal