Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis,
A) the budget line will become steeper.
B) the budget line will become flatter.
C) the slope of the budget line will not change.
D) the slope of the budget line will change, but in an indeterminate way.

Question

Quizplus · Accepted Answer

The slope of the budget line represents the rate at which the market is willing to substitute one good for another (the price ratio of the two goods). If the prices of both goods double, the price ratio between good A and good B remains unchanged, hence the slope of the budget line does not change.

Suppose That the Prices of Good a and Good B