Use the following to answer questions:
Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month, which he uses to purchase music downloads (MD) and streamed movies (SM). Each music download costs $1 and each streamed movie costs $5.
-(Scenario: Music Downloads and Streamed Movies) Read the scenario Music Downloads and Streamed Movies. Suppose Phillip's income falls by half, and the prices for both music downloads and streamed movies also fall by half. As a result of this, Phillip:
A) can buy fewer music downloads if he spends all of his income on music downloads.
B) can buy fewer streamed movies if he spends all of his income on streamed movies.
C) will not notice any change in his budget line.
D) will undergo a parallel shift out of his budget line.

Question

Quizplus · Accepted Answer

Phillip's income and the prices of both goods have fallen by half, meaning his purchasing power remains unchanged. Therefore, his budget line does not change.

Use the Following to Answer Questions