English

The rotation of budget line in the following diagram is due to:

Question

The diagram shows an inward rotation of the budget line from BA to BA₁, indicating a rise in the price of Good X while income and the price of Good Y remain constant.

Options

Decrease in price of Apples
Increase in price of Apples
Increase in price of Bananas
Decrease in price of Bananas

MCQ

Solution

Decrease in price of Apples

Explanation:

The depicted rotation is outward on the apples axis while the bananas intercept stays unchanged, indicating a decrease in the price of apples. A price change in one good rotates the budget line around the unchanged intercept.

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Q 55.Q 54.Q 56.

Chapter 2: Consumer's Equilibrium - OBJECTIVE QUESTIONS [Page 2.51]