Assume Bryce's budget constraint is represented by line C in the graph shown.Which of the following would cause Bryce's budget constraint to shift to A?
A) Bryce's income increased.
B) Bryce's income decreased.
C) Bryce's preferences for books and movies decreased.
D) Bryce's preferences for books and movies increased.

Question

Assume Bryce's budget constraint is represented by line C in the graph shown.Which of the following would cause Bryce's budget constraint to shift to A?
A) Bryce's income increased. 
B) Bryce's income decreased. 
C) Bryce's preferences for books and movies decreased. 
D) Bryce's preferences for books and movies increased.

Quizplus · Accepted Answer

Bryce's budget constraint is determined by the combination of his income and the prices of books and movies. If his income increases, he will be able to afford more of both goods at any given price level, causing his budget constraint to shift outward (to the right) from C to A. Similarly, if his income decreases, his budget constraint will shift inward (to the left) from C to a new line located inside the current one. A change in preferences for books and movies, on the other hand, would affect Bryce's willingness to pay for each good, but it would not affect his ability to purchase them given his income and the prices. Therefore, it would not directly shift his budget constraint.

Assume Bryce's Budget Constraint Is Represented by Line C in the Graph