The quantity of good Y is measured along the vertical axis, and the quantity of good X is measured along the horizontal axis. If the prices of both good Y and good X rise, the budget line
A) shifts outward to the right and the vertical and horizontal intercepts will both rise.
B) shifts inward to the left and both intercepts will decline.
C) rotates, rising along the vertical axis but falling along the horizontal axis.
D) none of the above.

Question

Quizplus · Accepted Answer

When the prices of both goods X and Y rise, the consumer's purchasing power decreases, leading to a budget line that shifts inward to the left, indicating that with the same budget, the consumer can now buy less of both goods. Hence, both intercepts will decline.

The Quantity of Good Y Is Measured Along the Vertical