Gertrude has a $15 budget to spend on soda and crackers.Soda costs $1 per bottle and crackers cost 50¢ each.If the price of soda increases to $2 per bottle,the ________ rotates inward and there is a movement along the ________.
A) budget line; demand curve for crackers
B) demand curve; indifference curve for crackers
C) budget line; demand curve for soda
D) demand curve; indifference curve for soda
E) indifference curves; demand curve for soda

Question

Quizplus · Accepted Answer

When the price of soda increases, the budget line rotates inward because Gertrude can no longer afford as many bottles of soda as before. However, there is a movement along the demand curve for soda because the price has changed, causing her to adjust the quantity of soda she is willing to buy. The demand curve for crackers is not affected by the change in price of soda, so options A and B are incorrect. Option D is also incorrect because there is no movement along an indifference curve - those represent the same level of satisfaction regardless of price or budget. Option E does not make sense as indifference curves are not related to prices or budget constraints.

Gertrude Has a $15 Budget to Spend on Soda and Crackers.Soda