Refer to the information provided in Figure 6.5 below to answer the question(s) that follow. Figure 6.5
-Refer to Figure 6.5. Molly's budget constraint is CD. If the price of CDs increases, her new budget constraint becomes
A) AD.
B) AO.
C) BE.
D) EF.

Question

Refer to the information provided in Figure 6.5 below to answer the question(s) that follow.  Figure 6.5
-Refer to Figure 6.5. Molly's budget constraint is CD. If the price of CDs increases, her new budget constraint becomes
A) AD. 
B) AO. 
C) BE. 
D) EF.

Quizplus · Accepted Answer

The price of CDs increases, so Molly can buy fewer CDs at the same price. Her new budget constraint becomes AD, which is closer to the origin than CD.

Refer to the Information Provided in Figure 6