Suppose the Only Two Goods That Brett Consumes Are Wine

question 226

Multiple Choice

Suppose the only two goods that Brett 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 Brett's budget has not changed.
• B) the slope of Brett's budget constraint is flatter at the new prices.
• C) the slope of Brett's budget constraint is steeper at the new prices.
• D) Brett's budget constraint has shifted in a parallel fashion to the budget constraint with the old prices.

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Definitions:

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