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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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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