The Diagram Below Shows a Set of Budget Lines Facing

question 54

Multiple Choice

The diagram below shows a set of budget lines facing a household. FIGURE 6- 7
-Refer to Figure 6- 7. The movement of the budget line from ab to ac could be caused by

• A) an increase in the price of food.
• B) a decrease in the price of housing.
• C) a decrease in the price of food.
• D) an increase in money income.
• E) an increase in the price of housing.

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Definitions:

MC

Marginal Cost, which is the increase in total cost that arises from producing one additional unit of a good or service.

Price-Discriminates

Price discrimination involves selling the same product or service at different prices to different customers, based on factors like demand, cost of serving, or market segmentation.

Producer Surplus

The difference between what producers are willing and able to supply a good for and the actual price they receive, measuring the benefit to producers from market transactions.

Deadweight Loss

The decline in economic productivity due to the failure to achieve or the impossibility of achieving equilibrium for a specific good or service.