The following figure shows the weekly income (in dollars) and leisure (in hours) of a worker using an indifference curve and a budget line.
Figure 17-1
-_____ will cause the budget line in Figure 17-1 to rotate from NY₂ to NY₃.

Question

The following figure shows the weekly income (in dollars) and leisure (in hours) of a worker using an indifference curve and a budget line.
Figure 17-1

-_____ will cause the budget line in Figure 17-1 to rotate from NY₂ to NY₃.

Quizplus · Accepted Answer

An increase in the wage rate will cause the budget line to pivot outward from the origin, allowing the worker to afford more of both leisure and income. This will result in a new budget line that is further out than the previous one, such as NY₃. Both increases in work effort (option A) and decreases in work effort (option B) would result in a shift along the same budget line. A fall in the wage rate (option D) would lead to a pivoting inward of the budget line, reducing the worker's ability to afford both income and leisure. Therefore, option C is the correct answer.

The Following Figure Shows the Weekly Income (In Dollars)and Leisure