Exhibit 20-8

Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a
A)rise in the price of good X.
B)fall in the price of good X.
C)rise in the price of good Y.
D)fall in income.

Question

Exhibit 20-8 ​

Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a
A)rise in the price of good X. 
B)fall in the price of good X. 
C)rise in the price of good Y. 
D)fall in income.

Quizplus · Accepted Answer

A move of the budget constraint from 2 to 3 indicates an increase in the quantity of good X that can be purchased with the same income and price of good Y. This can only occur if the price of good X falls, as a lower price will allow for a greater quantity to be purchased with the same amount of income.

Exhibit 20-8 ​ Refer to Exhibit 20-8. a Move of the Budget Constraint

Exhibit 20-8 Refer to Exhibit 20-8. a Move of the Budget Constraint