If the price of one good increases while the price of the other good and the consumer's income remain unchanged,what will happen to the budget line?
A) The budget line rotates inward from the intercept on the axis of the good that did not change in price.
B) The budget line rotates outward from the intercept on the axis of the good that did not change in price.
C) The budget line shifts inward without a change in slope.
D) The budget line shifts outward without a change in slope.

Question

Quizplus · Accepted Answer

When the price of one good increases while the price of the other good and the consumer's income remain unchanged, the budget line rotates inward from the intercept on the axis of the good that did not change in price. This is because the consumer can now afford less of the good that increased in price and therefore the maximum combination of the two goods that can be purchased with the given income decreases.

If the Price of One Good Increases While the Price