Asked by sachdeva prince on Jul 08, 2024
Verified
Edith is buying products X and Y with her money income.Suppose her budget line shifts rightward (outward) .This might be the result of:
A) the prices of X and Y increasing while her money income remains constant.
B) her money income decreasing while the prices of X and Y remain constant.
C) her money income increasing more than proportionately to increases in the prices of X and Y.
D) none of these.
Budget Line
A graphical representation of all possible combinations of two goods that can be purchased with a given budget at fixed prices.
Money Income
The total amount of monetary earnings or inflow received by an individual or entity, typically measured within a certain time period.
- Scrutinize the effects that modifications in income and price have on the choices made by consumers and the budget line's alignment.
Verified Answer
HS
HARMANPREET SINGHJul 13, 2024
Final Answer :
C
Explanation :
When Edith's budget line shifts rightward (outward), this means she can now afford more of both products X and Y. This can happen if her money income increases more than proportionately to increases in the prices of X and Y. So option C is the best choice. Option A would result in a leftward (inward) shift of the budget line, and option B would result in a parallel shift leftward (inward) shift of the budget line.
Learning Objectives
- Scrutinize the effects that modifications in income and price have on the choices made by consumers and the budget line's alignment.