Suppose the Only Two Goods That Lorenzo Consumes Are Wine

question 150

Multiple Choice

Suppose the only two goods that Lorenzo consumes are wine and cheese. When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100. One day the price of wine falls to $5 a bottle, and the price of cheese increases to $20 a pound, while his income does not change. If you illustrate wine on the vertical axis and cheese on the horizontal axis, then

• A)the slope of Lorenzo's budget has not changed.
• B)the slope of Lorenzo's budget constraint is flatter at the new prices.
• C)the slope of Lorenzo's budget constraint is steeper at the new prices.
• D)Lorenzo's budget constraint has shifted in a parallel fashion to the budget constraint with the old prices.

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Definitions:

Storage

The action or method of keeping something for future use, typically in a warehouse or other depository.

Handling

The process of managing, controlling, or dealing with something, often with care.

Vital Signs

Measurements of the body's most basic functions, including body temperature, pulse rate, respiration rate, and blood pressure, used to assess the general physical health of a person.

Blood Pressure

The pressure of circulating blood on the walls of blood vessels, a critical measure of heart and vascular health.