Answer to Question 1
A decrease in the price of one good causes the budget constraint to pivot rightward along the axis that measures the quantity of the good in question. This is because the consumer's endowment can buy more units of a good when the price falls. The slope of the budget constraint also changes because the opportunity cost changes when the price of a good falls.
In case of a decrease in the consumer's income, the budget constraint shifts to the left. The slope will not change as the opportunity cost does not change with a change in income.
Answer to Question 2
Yes, some monopolies are created by government legislation, such as patent or copyright laws and the granting of public franchises. Monopolies that are created because of legal barriers to entry are called legal monopolies.
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Refer to Scenario 3.1. If the price of potato chips is $0.50 and the price of Cola is $4.00, ...