Explain how changes in the price of goods and the consumer's budget affect the budget line
What will be an ideal response?
If the price of the good measured on the x-axis increases, the budget line rotates inward as the x-intercept decreases and the budget line becomes steeper. Conversely, if the price of the good measured on the x-axis decreases, the budget line rotates outward, the x-intercept increases, and the budget line becomes flatter.
If the price of the good measured on the y-axis increases, the y-intercept decreases as the budget line rotates inward and becomes flatter. However, if the price of the good measured on the y-axis decreases, the budget line rotates outward as the y-intercept increases, and the budget line becomes steeper.
Finally, if the budget increases, the budget line shifts outward (both intercepts increase) and the slope remains unchanged while if the budget decreases, the budget line shifts inward (both intercepts decrease), and the slope remains unchanged.
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In many high-tech industries in the economy, such as computers, medical equipment, and automobiles
a. price competition is utilized by firms more than innovation to compete with rivals. b. firms compete on the basis of innovation only; never engaging in price competition. c. innovation is utilized by firms to compete with rivals more than price competition. d. firms use price competition only; never engaging in innovation to compete with rivals. e. firms utilize innovation and price competition equally to compete with rivals.
A financial crisis is:
A. a sharp increase in asset prices that prevents new investors from being able to afford to purchase assets. B. a gradual decline in the value of a country's currency that leads to a prolonged economic downturn. C. a sharp decline in asset prices that forces borrowers to sell off additional assets, further depressing prices. D. a sharp drop in the unemployment rate, leading to hyperinflation.