Choose the one alternative that best completes the statement or answers the question. FIGURE 6-8
-Refer to Figure 6-8. In part (ii), the line joining points X, Y, and Z is known asshows how _.
A) an indifference map; the value of various combinations of two goods changes.
B) an income-consumption line; consumption changes with changing relative prices and constant income
C) a price-consumption line; consumption changes as relative prices change, with money income constant
D) an income-consumption line; consumption changes as income changes, with relative prices held constant
E) a price-consumption line; consumption changes as money income and relative prices change

Question

Choose the one alternative that best completes the statement or answers the question.  FIGURE 6-8
-Refer to Figure 6-8. In part (ii), the line joining points X, Y, and Z is known asshows how _.
A) an indifference map; the value of various combinations of two goods changes. 
B) an income-consumption line; consumption changes with changing relative prices and constant income 
C) a price-consumption line; consumption changes as relative prices change, with money income constant 
D) an income-consumption line; consumption changes as income changes, with relative prices held constant 
E) a price-consumption line; consumption changes as money income and relative prices change

Quizplus · Accepted Answer

The line joining points X, Y, and Z in Figure 6-8 is a price-consumption line. This is because it shows how consumption changes as relative prices change, with money income held constant. The slope of the line represents the relative price of the two goods, and points on the line represents combinations of the two goods that have the same total expenditure at the given income level.

Choose the One Alternative That Best Completes the Statement or Answers