When the price of a good increases,all else equal,the higher price
A)reduces the consumer's set of buying opportunities.
B)leads to a parallel shift of the linear budget constraint.
C)will necessarily lead to an increase in the consumption of goods whose price did not change.
D)generally discourages the consumption of inferior goods.

Question

Quizplus · Accepted Answer

When the price of a good increases, it reduces the purchasing power of the consumer, leading to a decrease in the set of buying opportunities. The consumer will have to spend more money on the same quantity of the good, leaving less money to spend on other goods. Therefore, the answer is A. B is incorrect because a parallel shift of the linear budget constraint would occur only with a change in income or a change in the price of another good. C is incorrect because the consumption of goods whose price did not change would be unaffected unless they are complements or substitutes of the good whose price increased or the consumer's income changes. D is incorrect because the consumption of inferior goods increases when the consumer's income decreases, not when the price of the good increases.

When the Price of a Good Increases,all Else Equal,the Higher