**Question 7: Optimizing Consumer Choices**A consumer has to choose the optimal amount of cheese and crackers to purchase. They have drawn their budget constraint (BC) and indifference curves on a graph, where the amount of cheese (in ounces) is on the horizontal axis, and the amount of crackers (in packages) is on the vertical axis. **Question:** Which of the following statements is true if the price of crackers declines?- The BC shifts to the left (down).- **The BC shifts to the right (up).**- The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a lower point.- The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a higher point.**Correct Answer:** The BC shifts to the right (up).This question explores the effect of a price change on a consumer's budget constraint in a typical consumer choice model.

The budget constraint shows all the combinations of the items and services that can be purchased by…

A consumer has to choose the optimal amount of cheese and crackers to purchase. He or she has drawn his or her budget constraint (BC) and indifference curves on a graph with the amount of cheese (in ounces) on the horizontal axis and the amount of crackers (in packages) on the vertical axis. Which of the following statements is true if the price of crackers declines? The BC shifts to the left (down). o The BC shifts to the right (up). O The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a lower point. O The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a higher point.

A consumer has to choose the optimal amount of cheese and crackers to purchase. He or she has drawn his or her budget constraint (BC) and indifference curves on a graph with the amount of cheese (in ounces) on the horizontal axis and the amount of crackers (in packages) on the vertical axis. Which of the following statements is true if the price of crackers declines? The BC shifts to the left (down). o The BC shifts to the right (up). O The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a lower point. O The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a higher point.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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