How does a decrease in the price of one good affect a consumer's budget constraint? How is the effect different from a decrease in the consumer's income?
What will be an ideal response?
A decrease in the price of one good causes the budget constraint to pivot rightward along the axis that measures the quantity of the good in question. This is because the consumer's endowment can buy more units of a good when the price falls. The slope of the budget constraint also changes because the opportunity cost changes when the price of a good falls.
In case of a decrease in the consumer's income, the budget constraint shifts to the left. The slope will not change as the opportunity cost does not change with a change in income.
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If the bidders at an oral auction have true values of $78, $72, $66, and $65, the item will sell for
a. $78 b. just under $78 c. $72 d. just over $72
A demand curve represents a(n)
A) direct relationship between price and quantity demanded. B) direct relationship between price and demand. C) indirect or inverse relationship between price and quantity demanded. D) indirect or inverse relationship between price and supply.