Scenario 21-1
Suppose the price of nachos is $12, the price of water is $3, and the consumer's income is $216. In addition, suppose the consumer's budget constraint illustrates nachos on the horizontal axis and water on the vertical axis.
-Refer to Scenario 21-1. If the price of water doubles to $6, then the
A)budget constraint intersects the vertical axis at 36 waters.
B)slope of the budget constraint rises to −1.
C)slope of the budget constraint falls to −5.
D)budget constraint shifts inward in a parallel fashion.

Question

Quizplus · Accepted Answer

With the price of water doubling from $3 to $6, the amount of water that can be bought if all income ($216) is spent on water decreases from 72 units ($216/$3) to 36 units ($216/$6), hence the budget constraint intersects the vertical axis at 36 waters.

Scenario 21-1 Suppose the Price of Nachos Is $12, the Price of Price