Answer to Question #115993 in Microeconomics for albab

Question

A person has 100$ to spend on goods X and Y whose respective prices are 3$ and 5$. what happens to the original budget line if the budget falls by 25%

Answer 1

If spending falls by 25%, at that point cash will be; 100 - 25 = 75

In this way, the budget line will move nearer to the axis proportionately and the new budget line will be 3x + 5y = 75