If the price of a product increases, then
A) the budget line rotates and the optimal quantity demanded, which corresponds to the higher price, decreases.
B) the budget line rotates and the optimal quantity demanded, which corresponds to the higher price, increases.
C) the budget line shifts outward and the optimal quantity demanded, which corresponds to the higher price, decreases.
D) the budget line shifts inward and the optimal quantity demanded, which corresponds to the higher price, increases.

Question

Quizplus · Accepted Answer

If the price of a product increases, the budget line will rotate inward as the consumer's purchasing power decreases. As a result, the optimal quantity demanded, which corresponds to the higher price, will decrease. This is because the consumer can no longer afford to purchase the same quantity at the higher price.

If the Price of a Product Increases, Then