Assume That a Consumer Purchases Only Two Products

question 245

Multiple Choice

Assume that a consumer purchases only two products. Suppose that the consumer's money income doubles, and the prices of the two products also double. These changes in income and prices will result in

• A) a shift of the budget line inward to the left.
• B) a shift of the budget line outward to the right.
• C) no change in the budget line.
• D) an increase in the slope of the budget line.

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Definitions:

Autarky

An economic policy or situation in which a nation is self-sufficient and does not engage in international trade.

International Trade

The exchange of goods and services across international borders, allowing countries to expand markets for both imports and exports.

Producer Surplus

A reiteration emphasizing the financial gain producers experience when the market price exceeds their minimum acceptable price for selling a good or service.

Consumer Surplus

The divergence in consumers' maximum willingness to pay and the actual payment for a good or service.