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The blue budget line is for an income of $1000, P=$5 and Py=$10. At point A. the person is evenly dividing his income between purchases of good X and Y. At point B, the person is buying 20 units of Good X. Good X GoodY O f the person moves from Bundle B to Bundle H, the person is shifting income come purchasing Good X to Good Y while keeping total expenditures constant O if the person moves from Bundle B to Bundle H, the person is shifting income come purchasing Good Y to Good X while keeping total expenditures constant At Bundle H. the person is buying less than 20 units of Good X. O At Bundle H. the person is buying less than 20 units of Good Y.

The blue budget line is for an income of $1000, P=$5 and Py=$10. At point A. the person is evenly dividing his income between purchases of good X and Y. At point B, the person is buying 20 units of Good X. Good X GoodY O f the person moves from Bundle B to Bundle H, the person is shifting income come purchasing Good X to Good Y while keeping total expenditures constant O if the person moves from Bundle B to Bundle H, the person is shifting income come purchasing Good Y to Good X while keeping total expenditures constant At Bundle H. the person is buying less than 20 units of Good X. O At Bundle H. the person is buying less than 20 units of Good Y.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Title: Understanding Budget Lines and Consumer Choices** The image illustrates a budget line graph used to analyze consumer choices under budget constraints. **Graph Explanation:** - **Axes:** - The vertical axis (labeled as "Good X") represents the quantity of Good X. - The horizontal axis (labeled as "Good Y") represents the quantity of Good Y. - **Blue Budget Line:** - This line represents an income of $1000, with the prices of Good X (\(P_X\)) and Good Y (\(P_Y\)) given as $5 and $10, respectively. - **Key Points:** - **Point A:** The consumer divides their income evenly between Good X and Good Y. - **Point B:** The consumer buys 20 units of Good X. **Movements and Interpretations:** 1. **Moving from Bundle B to H:** - If the consumer moves from Bundle B to Bundle H: - They are reallocating their spending from Good X to Good Y while keeping the overall expenditures constant. - This is represented by a shift along the green line that maintains the total spending level. 2. **Purchasing Patterns:** - **At Bundle H:** Fewer than 20 units of Good X are purchased. - **At Bundle H:** More than 20 units of Good Y are purchased. This representation provides a clear understanding of how consumers can adjust their purchase decisions according to changing price or income circumstances, maintaining a constant level of total expenditures.
Transcribed Image Text:**Title: Understanding Budget Lines and Consumer Choices** The image illustrates a budget line graph used to analyze consumer choices under budget constraints. **Graph Explanation:** - **Axes:** - The vertical axis (labeled as "Good X") represents the quantity of Good X. - The horizontal axis (labeled as "Good Y") represents the quantity of Good Y. - **Blue Budget Line:** - This line represents an income of $1000, with the prices of Good X (\(P_X\)) and Good Y (\(P_Y\)) given as $5 and $10, respectively. - **Key Points:** - **Point A:** The consumer divides their income evenly between Good X and Good Y. - **Point B:** The consumer buys 20 units of Good X. **Movements and Interpretations:** 1. **Moving from Bundle B to H:** - If the consumer moves from Bundle B to Bundle H: - They are reallocating their spending from Good X to Good Y while keeping the overall expenditures constant. - This is represented by a shift along the green line that maintains the total spending level. 2. **Purchasing Patterns:** - **At Bundle H:** Fewer than 20 units of Good X are purchased. - **At Bundle H:** More than 20 units of Good Y are purchased. This representation provides a clear understanding of how consumers can adjust their purchase decisions according to changing price or income circumstances, maintaining a constant level of total expenditures.
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