The following changes in a consumer's economic circumstances result in a steeper budget line with the vertical intercept unchanged.(Denote the good on the horizontal as good 1 and the good on the vertical as good 2.)

Question

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A k percent decrease in the price of good 2 combined with a k percent decrease in income will result in a steeper budget line with the vertical intercept unchanged. This is because the decrease in the price of good 2 will increase the quantity of good 2 that can be purchased for any given income, while the decrease in income will decrease the total amount of money available to spend on both goods. As a result, the budget line will become steeper, but the vertical intercept will remain the same.

The Following Changes in a Consumer's Economic Circumstances Result in a Steeper