Assume the quantity of good X is measured on the horizontal axis and the quantity of good Y on the vertical axis.Initial prices are P_X = $5 and P_Y = $10.The consumer's income is $100.If P_Y increases to $20,then A)the entire budget line shifts parallel toward the origin. B)the budget line will rotate toward the origin,slope remaining constant. C)the budget line will rotate toward the origin with the slope changing from 1/2 to 1/4 (in absolute values). D)the entire budget line shifts parallel away from the origin. E)the budget line will rotate away from the origin with the slope changing from 1/4 to 1/2 (in absolute values).

Question

Quizplus · Accepted Answer

When the price of good Y increases from $10 to $20, the budget line rotates inward, and the slope changes from -P_X/P_Y = -5/10 = -1/2 to -5/20 = -1/4.

Assume the Quantity of Good X Is Measured on the Horizontal