Exhibit 6A-1 Budget line

-As shown in Exhibit 6A-1, a leftward shift in the budget line from CD to AB would result from:
A) a price reduction in good X.
B) a price reduction in good Y.
C) a decrease in consumer income.
D) an increase in consumer income.

Question

Exhibit 6A-1 Budget line
​ 
-​As shown in Exhibit 6A-1, a leftward shift in the budget line from CD to AB would result from:
A) ​a price reduction in good X. 
B) ​a price reduction in good Y. 
C) ​a decrease in consumer income. 
D) ​an increase in consumer income.

Quizplus · Accepted Answer

A leftward shift in the budget line indicates a decrease in consumer income, since the consumer can now afford fewer quantities of both goods X and Y at the given prices. A price reduction in either good X or Y would cause a parallel shift in the budget line, while an increase in income or a decrease in the price of both goods X and Y would cause a rightward shift in the budget line.

Exhibit 6A-1 Budget Line