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Figure: Budget Lines for Oranges and Apples
-(Figure: Budget Lines for Oranges and Apples)Use Figure: Budget Lines for Oranges and Apples.For some time,Antonio has had $5 per month to spend on oranges and apples.The price of an orange is $0.50 and the price of an apple is $0.25.Which chart shows what will happen to his budget line if the prices of the two goods fall by 20%?
A) A
B) B
C) C
D) D

Question

Use the following to answer questions :
Figure: Budget Lines for Oranges and Apples 
-(Figure: Budget Lines for Oranges and Apples)Use Figure: Budget Lines for Oranges and Apples.For some time,Antonio has had $5 per month to spend on oranges and apples.The price of an orange is $0.50 and the price of an apple is $0.25.Which chart shows what will happen to his budget line if the prices of the two goods fall by 20%?
A) A 
B) B 
C) C 
D) D

Quizplus · Accepted Answer

The prices of both oranges and apples have fallen by 20%, so the budget line will shift outward. The new budget line will be parallel to the old budget line, but it will be further from the origin. This is because Antonio will now be able to buy more oranges and apples for the same amount of money.

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