On a budget line,sub sandwiches are measured on the x-axis and sodas are measured on the y-axis.The price of a sub is $5 and the price of a soda is $1.If the price of a sub decreases to $4,the relative price of ________.
A) sub sandwiches falls and the budget line becomes less steep
B) sub sandwiches rises and the budget line becomes flatter
C) sodas falls and the budget line becomes flatter
D) both sub sandwiches and soda falls and the budget line shifts outward
E) sodas does not change and neither does the budget line

Question

Quizplus · Accepted Answer

When the price of a sub decreases to $4, the relative price of sub sandwiches falls. This is because the price of soda (the alternative good) remains constant at $1, while the price of subs has decreased. As a result, the opportunity cost of buying a sub (in terms of sodas forgone) has decreased, meaning that the relative price of subs has fallen. This change in relative price will cause the budget line to become less steep, as consumers can now purchase more subs for the same amount of money that they previously allocated for a certain bundle of subs and sodas.

On a Budget Line,sub Sandwiches Are Measured on the X-Axis