What happens to the original budget line if the price of good ? doubled? (i.e., Will there be a change in the slope and/or intercepts of the original budget line? If yes, what are those changes?). Interpret economically how the change in the price of good ? affects the consumption decision of the consumer Assume that a consumer spends all of her income (B) on good X and good Y, her budget constraintcan be expressed as:PxX + PyY = BWhere Px is the price of good X, X is the quantity of good X consumed, Py is the price of good Y, Yis the quantity of good Y consumed, and B is the consumer's total income.Rearranging the above equation to get the budget line expressed as Y in terms of X, we have:BY ==Py PyPx-XNow, suppose the consumer has an income of $120 to spend on goods X and Y whose prices are $3and $5, respectively.

A Budget Line is a line of constraint for a consumer. It constrains consumers from consuming and…

Answered: What happens to the original budget…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What happens to the original budget line if the price of good ? doubled? (i.e., Will there be a
change in the slope and/or intercepts of the original budget line? If yes, what are those changes?).
Interpret economically how the change in the price of good ? affects the consumption decision
of the consumer

Assume that a consumer spends all of her income (B) on good X and good Y, her budget constraint
can be expressed as:
PxX + PyY = B
Where Px is the price of good X, X is the quantity of good X consumed, Py is the price of good Y, Y
is the quantity of good Y consumed, and B is the consumer's total income.
Rearranging the above equation to get the budget line expressed as Y in terms of X, we have:
B
Y ==
Py Py
Px
-X
Now, suppose the consumer has an income of $120 to spend on goods X and Y whose prices are $3
and $5, respectively.

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