Refer to the information provided in Figure 6.7 below to answer the question(s) that follow. Figure 6.7
-Refer to Figure 6.7. Along budget constraint AB, the price of good X is $25 and the price of good Y is $18. If the price of Y decreases to $14, the budget constraint will
A) pivot in at point B.
B) pivot out at point A.
C) shift in parallel to AB.
D) pivot in at point A.

Question

Refer to the information provided in Figure 6.7 below to answer the question(s) that follow.  Figure 6.7
-Refer to Figure 6.7. Along budget constraint AB, the price of good X is $25 and the price of good Y is $18. If the price of Y decreases to $14, the budget constraint will
A) pivot in at point B. 
B) pivot out at point A. 
C) shift in parallel to AB. 
D) pivot in at point A.

Quizplus · Accepted Answer

When the price of good Y decreases, the consumer can afford more of good Y for the same amount of money, assuming income and the price of good X remain constant. This change causes the budget constraint to pivot outwards at point A (where no Y and maximum X is consumed) because the consumer can now purchase more of good Y with the same budget, increasing the slope of the budget line.

Refer to the Information Provided in Figure 6