If the price of a good rises and the consumer's budget remains the same, what happens to the consumer's consumption possibilities?
What will be an ideal response?
The consumer's consumption possibilities decrease. This decrease is reflected by the change in the budget line, which rotates inward. The inward movement means that consumption possibilities that had previously been affordable are no longer affordable and hence the possible consumption possibilities have decreased.
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The term "unit elasticity" is used to describe a situation in which a rise in price is accompanied by
a. a fall in total expenditure. b. a rise in total expenditure. c. constant total expenditure. d. a unit decrease in total expenditure.
Which of the following is NOT related to fiscal policy?
A. reducing the budget deficit B. increasing government expenditures C. decreasing marginal tax rates D. passage of a new regulation on a specific industry