An increase in the price of good $x$ and an equal percentage increase in the price of good $y$ changes the $x$-intercept, the $y$-intercept, and the slope of the budget constraint.

Question

Quizplus · Accepted Answer

An increase in the price of both goods by the same percentage does not change the slope of the budget constraint because the slope is determined by the price ratio of the two goods, which remains unchanged if both prices increase by the same percentage. However, it does change the $x$-intercept and the $y$-intercept because these are determined by how much of each good can be bought with a given budget, which would decrease due to the price increases.

An Increase in the Price of Good xxx And an Equal Percentage Increase in the Price of Good

An Increase in the Price of Good $x$ And an Equal Percentage Increase in the Price of Good