Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis and good B

Question

alexandr1967 [171]

3 years ago

10

Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis and good B

is plotted along the vertical axis:_______
a. the budget line will become flatter.
b. the slope of the budget line will not change.
c. the slope of the budget line will change, but in an indeterminate way.
d. the budget line will become steeper.

Business

1 answer:

Zigmanuir [339] · Answer 1 · 2022-01-31T20:07:27+03:00

Answer:

The correct answer is option b.

Explanation:

A budget line shows the maximum possible combination of two goods that a consumer can purchase by spending his/her whole income.

The quantities of those two goods are mentioned on both the axes. If the price of both the products is doubled. The consumer will be able to afford half the quantity than what he was consuming earlier.

This will cause the budget line to shift to the left. This new budget line will be parallel to the initial one. The slope of the budget line will remain the same.