If Toby buys two goods and the prices of both goods increase by 50%,
A)the budget constraint will be unchanged.
B)the slope of the budget constraint stay the same.
C)the slope of the budget constraint will decrease.
D)the budget constraint will shift outward in a parallel fashion.

Question

Quizplus · Accepted Answer

When the prices of both goods increase by the same percentage, the slope of the budget constraint, which is determined by the ratio of the prices of the two goods, remains unchanged. The slope represents the rate at which one good can be substituted for another based on their prices, and a uniform price increase does not alter this rate.

If Toby Buys Two Goods and the Prices of Both