A change in the price of the good measured on the horizontal axis changes ________ of the budget line.
A)the slope and y-intercept
B)the slope and x-intercept
C)the x- and y-intercepts but not the slope
D)only the slope
E)only the x-intercept

Question

Quizplus · Accepted Answer

A change in the price of the good measured on the horizontal axis will affect the slope of the budget line, as it will change the trade-off between the two goods. Specifically, if the price of the good measured on the horizontal axis increases, the slope of the budget line will become steeper (i.e. the absolute value of the slope will increase), reflecting the fact that the consumer will have to give up more of the good measured on the vertical axis to consume the same amount of the good measured on the horizontal axis. The change in the price of the good on the horizontal axis will not affect the y-intercept, as this represents the maximum amount of the good measured on the vertical axis that the consumer can consume if they only consume that good (i.e. when the quantity of the good on the horizontal axis is zero). Therefore, choice B is the best answer.

A Change in the Price of the Good Measured on the Horizontal