If there are two goods with positive prices and the price of one good is reduced, while income and other prices remain constant, then the size of the budget set is reduced.

Question

Quizplus · Accepted Answer

The size of the budget set remains constant since income and other prices are constant. However, the relative price of the goods changes and the budget constraint pivots, causing a new optimal consumption bundle to emerge.

If There Are Two Goods with Positive Prices and the Price