INDICATE WHETHER THE STATEMENT IS TRUE OR FALSE. If there are two goods and the
ID: 1146789 • Letter: I
Question
INDICATE WHETHER THE STATEMENT IS TRUE OR FALSE.
If there are two goods and the prices of both goods rise, then the budget line must become steeper.
A decrease in income pivots the budget line around the bundle initially consumed.
If all prices are doubled and money income is left the same, the budget constraint does not change because relative prices do not change.
If good 1 is on the horizontal axis and good 2 is on the vertical axis, then an increase in the price of good 1 will not change the horizontal intercept of the budget line.
Explanation / Answer
Statement 1 is false
Statement 2 is false
Statement 3 is false because if all prices are double and money income is left the same the budget line shift inward in a parallel Ray
Statement 4 is true