If the Prices of Both Goods Increase by 10 Percent

question 109

Multiple Choice

If the prices of both goods increase by 10 percent, the budget line

• A)shifts to the right in parallel fashion.
• B)shifts to the left in parallel fashion.
• C)is unaffected since only relative price changes matter.
• D)pivots on the axis of the more expensive good.

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Definitions:

Price

The price in terms of money anticipated, needed, or given for purchasing something.

Supply

Supply is the total amount of a good or service available to consumers, often influenced by price, production costs, and market demand.

Quantity

The amount or number of a material or immaterial good considered as a unit or in total.

Technological Advance

Improvements in technology that increase productivity and efficiency, often leading to economic growth and new product development.