In 2012, the Associated Press examined the effect higher gas prices on consumption of other goods. It said that the increase in the price of gasoline has decreased the quantity of other goods, such as food, that people consume. (Source: Associated Press, September 28, 2012)
-If consumers spend their income either on gasoline or food, then an increase in the price of gasoline rotates the budget line
A) inward along the "food" axis.
B) outward along the "food" axis.
C) inward along the "gasoline" axis.
D) outward along the "gasoline" axis.

Question

Quizplus · Accepted Answer

An increase in the price of gasoline would cause the budget line to rotate inward along the "gasoline" axis, as less of it can be purchased with the same amount of income. This means that the consumer would have to give up some gasoline to purchase the same amount of food as before, leading to a decrease in the quantity of other goods, such as food, that people consume.

In 2012, the Associated Press Examined the Effect Higher Gas