Consider two goods,X and Y,where X is measured on the horizontal axis and Y is measured on the vertical axis.All else constant,a decrease in the price of X will cause the consumer's budget constraint to:
A)rotate in along the X axis
B)rotate out along the X axis.
C)shift out parallel to the original budget constraint.
D)shift in parallel to the original budget constraint.

Question

Quizplus · Accepted Answer

A decrease in the price of good X, while keeping the price of good Y and the consumer's income constant, makes good X relatively cheaper. This allows the consumer to afford more of good X for the same amount of money, effectively rotating the budget constraint outward along the X-axis. This reflects the increased purchasing power specifically towards good X.

Consider Two Goods,X and Y,where X Is Measured on the Horizontal