As the price of food changes, the budget line for clothing and food pivots about a single point on the clothing axis.

Question

Quizplus · Accepted Answer

The budget line represents the combinations of two goods (in this case, clothing and food) that a consumer can afford to buy given their income and the prices of the goods. As the price of food changes, the slope of the budget line changes, and the line pivots about the intercept on the food axis. However, the point where the budget line intersects the clothing axis (i.e. where the entire budget is spent on clothing and no food is purchased) remains fixed, and the budget line pivots around this point. Therefore, the statement is true.

As the Price of Food Changes, the Budget Line for Clothing