Use the following to answer question:
Figure 4.13
-(Figure 4.13) What rotated the budget constraint?
A) an increase in the price of good X
B) a decrease in the price of good Y
C) a decrease in income
D) an increase in the price of good Y

Question

Use the following to answer question:
Figure 4.13 
-(Figure 4.13) What rotated the budget constraint?
A) an increase in the price of good X 
B) a decrease in the price of good Y 
C) a decrease in income 
D) an increase in the price of good Y

Quizplus · Accepted Answer

The budget constraint rotates because of an increase in the price of good Y. When the price of good Y increases, the slope of the budget constraint changes, causing it to rotate inward. Therefore, choice D is correct. The other options do not affect the slope of the budget constraint in the same way.

Use the Following to Answer Question