Now suppose your income returns to its original level, $300, the price of sweaters remains constant at $20, but the price of jeans falls from $60 per pair to $30 per pair, so your new budget constraint is $30j + $20s = $300. This rotation of your budget constraint is shown in the graph below.
As a result of the decrease in the price of jeans from $60 per pair to $30 per pair, the opportunity cost of a pair of jeans ________.
A) remains unchanged at 3 sweaters
B) falls to 2 sweaters
C) falls to 1.5 sweaters
D) falls to sweaters

Question

Now suppose your income returns to its original level, $300, the price of sweaters remains constant at $20, but the price of jeans falls from $60 per pair to $30 per pair, so your new budget constraint is $30j + $20s = $300. This rotation of your budget constraint is shown in the graph below.
 As a result of the decrease in the price of jeans from $60 per pair to $30 per pair, the opportunity cost of a pair of jeans ________.
A) remains unchanged at 3 sweaters 
B) falls to 2 sweaters 
C) falls to 1.5 sweaters 
D) falls to sweaters

Quizplus · Accepted Answer

The Answer is C

Now Suppose Your Income Returns to Its Original Level, $300