The cause for a parallel shift in the budget constraint.

Question

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Answer 1

Question

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

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Students have asked these similar questions

Question 4 A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per bottle. Draw the consumer’s budget constraint (put pillow on the horizontal axis). What is the slope of this budget constraint? Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both pillows and soda are normal goods. The price of pillows rises from $35 to $40 per pillow, while the price of sodas is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects. Under what circumstance(s) if any can an increase in the price of pillows induce a consumer to buy more of that good? Explain. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.

4) Refer to Figure 6.6. Bill's budget constraint was originally AD. If his new budget constraint is EF, then his incomeA) increased.B) decreased.C) increased and the price of black beans price increased.D) increased and the price of bell peppers decreased.5) Refer to Figure 6.6. Bill's budget constraint is BD. Bill's income is $600, the price of a bell pepper is $1, and the price of a bag of black beans is $2. At point D Bill is buying ________ bell peppers and ________ bags of blackbeans.A) 600; 300 B) 0; 300 C) 600; 0 D) 300; 150

A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per bottle. a. Draw the consumer's budget constraint (put pillow on the horizontal axis). What is the slope of this budget constraint? b. Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both pillows and soda are normal goods. c. The price of pillows rises from $35 to $40 per pillow, while the price of sodas is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects. d. Under what circumstance(s) if any can an increase in the price of pillows induce a consumer to buy more of that good? Explain. e. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.

Answer 2

Question

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

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Answer 3

Question

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

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Answer 4

Question

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

Answer 6

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

Answer 7

Chapter 21, Problem 1CQQ

To determine

The cause for a parallel shift in the budget constraint.

Answer 8

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'd' is correct.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (d):

The budget constraint is the constraint which is due to the budget of the individual. The human wants and needs are unlimited and when the budget of the individual is not unlimited, it will lead to the constraint of needs and this constraint raised due to the limited budget is known as the budget constraint of the individual. Thus, a budget constraint will represent all the possible combinations of two commodities that an individual can consume at the given market prices and with all his income in hand.

Here, the budget of the consumer is $100, the price of pizza is $10 and that of soda is $2. Thus, the consumer can buy 10 pizzas and no soda or 50 sodas and no pizza when the whole income is spend on either of the commodities only. When the price of any one increases or decreases, it will lead to the shift in the intercept of the budget constraint which represents that commodity, in order to have a parallel shift outwards, the price of both the commodities should double and the total income of the consumer should increase by four times. Since option 'd' gives such values, option 'd' is correct.

Option (a):

When price of the items falls to half of the previous level along with the income, there will be no change in the quantities demanded and thus there will be no shift in the budget constraint which means that option 'a' is incorrect.

Option (b):

When price of the items increases to twice of the previous level and the income remains the same, there will be a decline in the quantities demanded and thus there will an inward shift in the budget constraint which means that option 'b' is incorrect.

Option (c):

When there is an increase in the income to $120 and the decrease in the price levels of soda to $1 and the pizza to $8 take place, these will lead to an unparallel shift in the budget constraint which means that the option 'c' is incorrect.

Answer 12

Economics Concept Introduction

Concept introduction:

Budget constraint: It represents all the combinations of two goods that the consumer can consume with the given price level and the income in the hands of the individual.

Answer 13

Ch. 21.1 - Prob. 1QQ Ch. 21.2 - Prob. 2QQ Ch. 21.3 - Prob. 3QQ Ch. 21.4 - Prob. 4QQ Ch. 21 - Prob. 1CQQ Ch. 21 - Prob. 2CQQ Ch. 21 - Prob. 3CQQ Ch. 21 - Prob. 4CQQ Ch. 21 - Prob. 5CQQ Ch. 21 - Prob. 6CQQ

The cause for a parallel shift in the budget constraint.

The cause for a parallel shift in the budget constraint.

Answer to Problem 1CQQ

Explanation of Solution

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Chapter 21 Solutions