Consider a budget line drawn with apples on the vertical axis and oranges on the horizontal axis. The consumer's income is $100, the price of apples is $5, and the price of oranges is $10. Suppose the consumer's income falls to $75.00, but the prices of apples and oranges remain unchanged. The change in income produces a: a) parallel shift inward of the indifference curves. b) new budget line which is flatter than the original one. c) new budget line which is steeper than the original one. d) parallel shift inward of the budget line
Consider a budget line drawn with apples on the vertical axis and oranges on the horizontal axis. The consumer's income is $100, the price of apples is $5, and the price of oranges is $10. Suppose the consumer's income falls to $75.00, but the prices of apples and oranges remain unchanged. The change in income produces a: a) parallel shift inward of the indifference curves. b) new budget line which is flatter than the original one. c) new budget line which is steeper than the original one. d) parallel shift inward of the budget line
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Consider a budget line drawn with apples on the vertical axis and oranges on the horizontal axis. The consumer's income is $100, the price of apples is $5, and the price of oranges is $10. Suppose the consumer's income falls to $75.00, but the prices of apples and oranges remain unchanged. The change in income produces a:
a) parallel shift inward of the indifference curves.
b) new budget line which is flatter than the original one.
c) new budget line which is steeper than the original one.
d) parallel shift inward of the budget line
Expert Solution
Given
Initial Income = 100
Price of Apple = 5
Price of Orange = 10
Income decreases to 75
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