Suppose the price of a pizza is €8, the price of a milk shake is €2, and the consumer's weekly income is €32. Suppose we have constructed the consumer's budget line with pizzas on the vertical axis and milk shakes on the horizontal axis. Given this information, if the price of a milk shake doubles to €4, then what will happen to the budget line?
A) It will move so that it intersects the horizontal axis at 16 milk shakes per week.
B) Its slope rises to -1/2.
C) It will move so that it intersects the horizontal axis at 8 milk shakes per week.
D) It will shift inward but remain parallel to its original position.

Question

Quizplus · Accepted Answer

When the price of a milk shake doubles to €4, the maximum number of milk shakes the consumer can buy with €32 is 8, so the budget line intersects the horizontal axis at 8 milk shakes.

Suppose the Price of a Pizza Is €8, the Price