If Both Prices Decreases by 50

question 58

Multiple Choice

If both prices decreases by 50%,

• A) budget constraint will be unchanged.
• B) slope of the budget constraint will increase.
• C) slope of the budget constraint will decrease.
• D) budget constraint will shift outward in a parallel fashion.

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Definitions:

Normal Good

A type of good for which demand increases as the income of the consumer increases, showing a positive relationship between income and demand.

Demand Function

A mathematical formula that describes the relationship between the quantity of a good or service demanded and its price, along with other factors like income and the prices of related goods.

Substitution Effect

The effect observed when consumers replace more expensive items with cheaper alternatives due to changes in relative price levels, affecting demand for goods.

Utility Function

Describes how different combinations of goods or services (or different outcomes) provide levels of satisfaction or utility to an individual.