-Lizzie's budget line is shown in the figure above. If the price of a magazine rises, Lizzie's real income in terms of magazines books ________ and her real income in terms of cookies ________.
A) increases; does not change
B) decreases; does not change
C) decreases; increases
D) increases; decreases

Question

-Lizzie's budget line is shown in the figure above. If the price of a magazine rises, Lizzie's real income in terms of magazines books ________ and her real income in terms of cookies ________.
A) increases; does not change 
B) decreases; does not change 
C) decreases; increases 
D) increases; decreases

Quizplus · Accepted Answer

When the price of a magazine rises, Lizzie can afford fewer magazines with the same income, so her real income in terms of magazines decreases. However, her real income in terms of cookies does not change because the price of cookies remains the same.

-Lizzie's Budget Line Is Shown in the Figure Above