Suppose the Budget Constraint Is Given by 200P + 50S

question 23

Multiple Choice

Suppose the budget constraint is given by 200P + 50S = 400, where P is Pizza and S is Spinach.If the prices of S and P increase by 10% each then the budget curve will:

• A)Shift the right with the same slope
• B)Shift to the left with the same slope
• C)Shift to the right but the slope will be different than before
• D)Shift to the left but the slope will be different than before

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Definitions:

Classical Theory

An economic theory that suggests that free markets operate under the laws of supply and demand and are self-regulating.

Employment

The condition of having paid work.

Unemployment

The situation in which individuals who are capable of working and actively seeking a job are unable to find employment.

Full Employment

Full employment refers to a situation where all available labor resources are being used in the most efficient way possible, with no involuntary unemployment.