Figure 6.7
-Refer to Figure 6.7.The change in the budget constraint from BC₁ to BC₂ implies

Question

Figure 6.7 -Refer to Figure 6.7.The change in the budget constraint from BC₁ to BC₂ implies

Quizplus · Accepted Answer

The change in the budget constraint from BC₁ to BC₂, which typically results in a pivot of the budget line, implies that the relative prices of the two goods have changed. Specifically, if the budget line rotates in such a way that it becomes steeper, this indicates that the price of the good on the vertical axis (DVDs in this case) has increased relative to the price of the good on the horizontal axis (CDs), suggesting that the price of DVDs has increased and the price of CDs has decreased.

Figure 6.7 -Refer to Figure 6.7.The Change in the Budget Constraint from Budget