Suppose that the prices of good x and good y both double and income triples.On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis,
A)the budget line becomes steeper and shifts inward.
B)the budget line becomes flatter and shifts outward.
C)the budget line becomes flatter and shifts inward.
D)the new budget line is parallel to the old budget line and lies below it.
E)None of the above.

Question

Quizplus · Accepted Answer

When both the prices of good x and good y double, and income triples, the budget line does not change its slope because the relative price of good x in terms of good y remains the same. The budget line shifts outward because the consumer can now afford more of both goods with the tripled income, despite the prices doubling. None of the provided options accurately describe this scenario.

Suppose That the Prices of Good X and Good Y