As the price of a good whose units are measured along the x-axis increases, holding the consumer's income and the price of the other good constant, the budget line will:
A)shift inward toward the origin.
B)shift outward away from the origin.
C)rotate such that the y-intercept stays the same and the x-intercept shifts toward the origin.
D)rotate outward away from the origin.

Question

Quizplus · Accepted Answer

When the price of a good increases, holding income and the price of the other good constant, the budget line rotates inward such that the y-intercept (representing the quantity of the other good) remains the same, but the x-intercept (representing the quantity of the good whose price has increased) shifts toward the origin. This reflects the decreased purchasing power for that good.

As the Price of a Good Whose Units Are Measured