1. True or false? (a) If all prices are doubled and money income is left the sam
ID: 1145494 • Letter: 1
Question
1. True or false? (a) If all prices are doubled and money income is left the same, the budget set does not (b) If good 1 is on the horizontal axis and good 2 is on the vertical axis, then an increase (c) Unlike in class, suppose that there are three goods. The price of good 1 is -$1, the change because relative prices do not change. in the price of good 1 will not change the horizontal intercept of the budget line. price of good 2 is $1, and the price of good 3 is $2, and it is possible to consume any non-negative amount of each good. A consumer who has an income of $10 could afford to consume some commodity bundles that include five units of good 1 and six units of good 2.Explanation / Answer
(a) false because money income should also double to keep purchasing power same. Thus budget set will change
(b) false because vertical intercept will not change. As prices increase less good 1 can be purchased. Since good 1 is on horizontal axis, the horizontal intercept will fall
(c) True. Because 10 will be sufficient to purchase 6 units of good 2.That will cost 6.Now five units of good 2 can be purchased at negative price. It means you are paid to purchase such good. So there is no budget problem
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.