Difficulty: 2 Correct Answer: b 44. Thomas consumes coffee (C) and doughnuts (D)

Question

Difficulty: 2 Correct Answer: b 44. Thomas consumes coffee (C) and doughnuts (D). His budget line was described by the equation D 20 2C. At a later time, his budget line could be described by the equation D = 10-C. The change between the earlier budget line and the later could be explained by the fact that a. the price of coffee and Thomas's income both in- b. the price of coffee increased and Thomas's income c. the price of coffee decreased and Thomas's income d. the price of coffee and Thomas's income both de- e. Thomas's utility for doughnuts decreased. creased. decreased increased. creased

Explanation / Answer

The change in budget line results mainly due to two factors:-

The leftward movement in budget line results from the increase in price and decrease in the income.

As the equation of budget line was D =20-2C

And it got changed to D =10-C

It represents that the budget line has shifted towards the origin . This could result when the price of the product has increased causing the person to buy lesser quantities and the decrease in income as now with the decreased income the customer can buy lesser quantities of the product.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---