**Budget Line Analysis for Tea and Scones**For months now, Agnes has had $20 per month to spend on tea and scones. The price of a cup of tea and the price of a scone have each been $1. Which of the charts in the accompanying diagram shows what will happen to her budget line if both prices double?**Description of Charts**1. **Chart A** - The chart displays a budget line with a noticeable kink or bend. - The axes intersect at the origin. - The line shows combinations of tea and scones Agnes can buy without the prices changing.2. **Chart B** - Similar to Chart A, this chart shows a straight line. - Reflects another set of possible consumption points without price changes.3. **Chart C** - This chart displays a line with a significant shift downward and inward compared to other charts. - Illustrates what would happen if both prices double: the quantity of tea and scones that Agnes can buy decreases.4. **Chart D** - Displays a more moderate shift similar to Chart C but not as pronounced.**Options:**- A. Chart A- B. Chart B- C. Chart C- D. Chart D**Correct Choice:**- C. Chart C: This chart shows the inward shift of the budget line when both prices double, reducing the number of tea and scones that can be purchased within the same budget.

budget constraint: PxX + PYY = m, where m is the income of the consumer Px is the price of good X and PY is the price of good Y.budget constraint: PxX + PYY = m, where m is the income of the consumer Px is the price of good X and PY is the price of good Y. thus with $20 income at PX= $1 and PY= $1, the consumer can have extreme either 20 Tea or 20 scones but with the doubling of the price for both good and income remaining constant the consumer can attain less of both the good. Thus consumers can have extreme either 10 Tea or 10 scones with the doubling of the price. Hence, chart C depicts the current scenario

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For months now, Agnes has had $20 per month to spend on tea and scones. The price of a cup of tea and the price of a scone have been each $1. Which of the charts in the accompanying diagram shows what will happen to her budget line if both prices double? Chart A Chart B Tea Tea 50 50 40 40 30 30 20 20 10- 10 10 15 20 25 30 10 15 20 Scones 25 30 Scones

For months now, Agnes has had $20 per month to spend on tea and scones. The price of a cup of tea and the price of a scone have been each $1. Which of the charts in the accompanying diagram shows what will happen to her budget line if both prices double? Chart A Chart B Tea Tea 50 50 40 40 30 30 20 20 10- 10 10 15 20 25 30 10 15 20 Scones 25 30 Scones

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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