-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a lobster dinner increases?
A) It would rotate inward around the vertical intercept, 10 lobster dinners.
B) It would rotate outward around the horizontal intercept, 20 steak dinners.
C) It would rotate inward around the horizontal intercept, 20 steak dinners.
D) It would rotate outward around the vertical intercept, 10 lobster dinners.

Question

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a lobster dinner increases?
A) It would rotate inward around the vertical intercept, 10 lobster dinners. 
B) It would rotate outward around the horizontal intercept, 20 steak dinners. 
C) It would rotate inward around the horizontal intercept, 20 steak dinners. 
D) It would rotate outward around the vertical intercept, 10 lobster dinners.

Quizplus · Accepted Answer

When the price of a lobster dinner increases, Jane can afford fewer lobster dinners if she spends all her money on them, causing the budget line to rotate inward around the point where she can afford the maximum number of steak dinners (the horizontal intercept), which remains unchanged.

-The Above Figure Shows Jane's Budget Line and Two of Her