Answer to Question #186814 in Microeconomics for Basant

Question

There are two goods in the economy good 1 and good 2 how does the budget line change if the price of good 1 decreases by a dollar but the price of good 2 and the consumers income remain unchanged

Answer 1

If the price of good 1 increases ,the budget line shifts inwards, this will pivot the budget line towards the intercept of good 2. Good 1 won't be bought in plenty but good 2 will be bought in plenty since the price remained unchanged.The x-intercept will shift in.