Question

I need help solving the problem below if you can explain it to me with the answer that would be awesome.

Consider the following pair of figures where the dark blue line is the original budget line for a consumer and the light blue line is the new one. In Figure A, the change shown was caused by Figure A O A. a decrease in the consumer's income. O B. a decrease in the price of good Y. O c. a change in the consumer's tastes away from good Y. OD. an increase in the price of good Y. Quantity of good Y Original Quantity of good X In Figure B, the change shown was caused by Figure B O A. an increase in the consumer's income. O B. the consumer's desire to increase overall consumption. O c. a decrease in the consumer's income. OD. an equal increase in the prices of both goods. Quantity of good Y Original Quantity of good X

Answer 1

Ans: D) an increase in the price of good Y.

Explanation:

When the price of a good increases then the consumer will purchase less of it with the given budget. As a result, the budget line will shift inward on the axis. In the above figure( figure A), due to increase in the price of good Y , the budget line shifts inward on the Y axis.

Ans: A) an increase in the consumer's income.

Explanation:

When the changes in consumer's income then the budget line will shift either leftward or rightward.

In the above case(figure B), budget line shifts rightward due to increase in the consumer's income.