According to the following figure,what could have caused a consumer's budget line to shift from ML to MN?
A)an increase in the price of X
B)a decrease in the price of X
C)an increase in the price of Y
D)a decrease in the price of Y
E)cannot determine without more information

Question

According to the following figure,what could have caused a consumer's budget line to shift from ML to MN? 
A)an increase in the price of X 
B)a decrease in the price of X 
C)an increase in the price of Y 
D)a decrease in the price of Y 
E)cannot determine without more information

Quizplus · Accepted Answer

If the budget line shifts inward (to the left), it suggests a reduction in the consumer's income or an increase in the price of one of the goods. As the graph shows a shift to the right, it suggests an increase in the consumer's income or a decrease in the price of one of the goods. Since the budget line shifted from ML to MN, it suggests a decrease in the price of X (since the intercept on the X-axis has increased). Therefore, the best choice is B.

According to the Following Figure,what Could Have Caused a Consumer's