Refer to the budget line shown in the diagram. Given the same money income, reductions in the prices of both products C and D will
A) shift the budget line outward on the horizontal axis but leave it anchored at "10" on the vertical axis.
B) shift the budget line to the left.
C) shift the budget line to the right.
D) have no effect on the budget line.

Question

Refer to the budget line shown in the diagram. Given the same money income, reductions in the prices of both products C and D will 
A) shift the budget line outward on the horizontal axis but leave it anchored at "10" on the vertical axis. 
B) shift the budget line to the left. 
C) shift the budget line to the right. 
D) have no effect on the budget line.

Quizplus · Accepted Answer

Reductions in the prices of both products C and D will shift the budget line to the right. This is because the consumer will now be able to purchase more of both products given the same income level.

Refer to the Budget Line Shown in the Diagram