Suppose the budget constraint is given by 200P + 50S = 400, where P is Pizza and S is Spinach.If the prices of S and P increase by 10% each then the budget curve will:
A)Shift the right with the same slope
B)Shift to the left with the same slope
C)Shift to the right but the slope will be different than before
D)Shift to the left but the slope will be different than before

Question

Quizplus · Accepted Answer

When prices increase by 10%, the budget constraint shifts to the left with the same slope, as the consumer can afford less of both goods.

Suppose the Budget Constraint Is Given by 200P + 50S