what happens to the budget line when consumer's income and price of good 2 remain unchanged but the price of good 1 changes?
Answers
Answered by
3
Answer:
Since the income and the price of good 1 are unchanged, the decrease in the price of good 2 will increase the vertical intercept of the budget line. The new budget line will also pivot outwards around the same horizontal intercept.
Answered by
4
Answer:
Since the income and the price of good 1 are unchanged, the decrease in the price of good 2 will increase the vertical intercept of the budget line. The new budget line will also pivot outwards around the same horizontal intercept.
As income increases and the prices do not change, the consumer can buy more of both the goods.
This is because the consumer can buy larger quantities of both goods with the same price.
In this case the budget line will shift to the right parallel to the original budget line.
Similar questions