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Author Question: Suppose a budget line is drawn between pizza, on the horizontal axis, and tacos, on the vertical ... (Read 106 times)

Melani1276

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on: Jun 29, 2018
Suppose a budget line is drawn between pizza, on the horizontal axis, and tacos, on the vertical axis. How does a change in the price of a pizza affect the budget line?
 
  What will be an ideal response?

Question 2

In the above figure, in order to promote an efficient allocation of resources, the government could grant a subsidy equal to
 
  A) zero.
  B) 5 per unit.
  C) 10 per unit.
  D) 15 per unit.


lgoldst9

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Reply #1 on: Jun 29, 2018
Answer to Question 1

When the price of the good measured on the horizontal axis, pizza, falls, the budget line rotates outward and becomes flatter. And, when the price of a pizza rises, the budget line rotates inward and becomes steeper.

Answer to Question 2

C


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