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 consumer's income rises to $288, then the budget line for nachos and water would
A)now intersect the horizontal axis at 24 orders of nachos and the vertical axis at 96 waters.
B)not change.
C)now intersect the horizontal axis at 17 orders of nachos and the vertical axis at 67 waters.
D)rotate outward along the water axis.

Question

Quizplus · Accepted Answer

With the increase in income from $216 to $288, the consumer can now afford more of both goods. The budget line shifts outward, showing that at the new income level, the consumer can afford 24 orders of nachos ($288/$12 per order of nachos) or 96 waters ($288/$3 per water), thus intersecting the horizontal axis at 24 orders of nachos and the vertical axis at 96 waters.

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