Question

If the prices of both goods increase by the same percent, the

budget line will
A) shift parallel to the left.
B) shift parallel to the right.
C) pivot about the x axis.
D) pivot about the y axis.

Answer 1

If the prices of both goods increase by the same percent, the budget line will shift parallel to the left.

Step-by-step explanation:

If the prices of both goods increase by the same percent, the budget line will shift parallel to the left. When the prices of both goods increase by the same percent, the consumer's purchasing power decreases. As a result, the budget line will shift to the left, indicating that the consumer can afford less of both goods.