Assume the Quantity of Good X Is Measured on the Horizontal

question 62

Multiple Choice

Assume the quantity of good X is measured on the horizontal axis and the quantity of good Y on the vertical axis. Initial prices are PX = $5 and PY = $10. The consumer's income is $100. If PY increases to $20, then

• A) the budget line will rotate to the left across the horizontal axis, slope remaining constant.
• B) the entire budget line shifts to the left with its slope changing from 1/2 to 1/4 (in absolute values).
• C) the entire budget line will shift to the right.
• D) the budget line will rotate to the right down the horizontal axis with the slope changing from 1/4 to 1/2 (in absolute values).
• E) the budget line will rotate to the left down the vertical axis with the slope changing from 1/2 to 1/4 (in absolute values).

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Definitions:

Indivisible

Unable to be divided or separated into parts without losing its essence or value, often used in legal contexts to describe contracts or obligations.

Agreement

An arrangement or contract between parties, often legally binding, outlining the terms and conditions of a mutual understanding.

Legal

According to the principles of law; according to the method required by statute; by means of judicial proceedings; not equitable.

Statute Violation

An act or omission that goes against a law enacted by a legislative body, potentially leading to legal penalties.