Answer to Question #241717 in Microeconomics for boss

Question

True or False?

In a graph of choice sets, a price change causes the slope of budget lines to change.

Answer 1

True

Explanation - Position of the budget line depends on two factors namely, income of the consumer and prices of the two goods. If income of the consumer remains unchanged, the budget line will shift to the right when there is a proportionate fall in the prices of both goods X and Y and vice versa. Thus, if the prices of both goods X and Y are reduced to half, the budget line will shift to the right showing twice the possible purchase of X and Y than before.