If both prices increases by 50%,
A) budget constraint will be unchanged.
B) slope of the budget constraint stay the same.
C) slope of the budget constraint will decrease.
D) budget constraint will shift outward in a parallel fashion.

Question

Quizplus · Accepted Answer

The slope of the budget constraint represents the rate at which one good can be substituted for another while staying within the budget. If both prices increase by the same percentage, the relative price (and thus the slope of the budget constraint) remains unchanged, as the increase does not affect the consumer's ability to substitute one good for another based on their prices.

If Both Prices Increases by 50