Consider the figure with the following two budget constraints, BC1 and BC2.

Consider next the following possibilities:

(a) Price of X increases, and income of the consumer also increases.

(b) Price of Y decreases, and income of the consumer also decreases.

(c) Price of Y increases, and income of consumer decreases.

(d) Price of X decreases, and income of the consumer remains unchanged.

(e) Price of X decreases, and income of the consumer increases.

(f) Price of X decreases, and income of the consumer also decreases.

Which of the above possibilities can lead to a movement of the budget constraint from BC1 to BC2? Consider each of the above scenario and justify/explain your reasons in detail.
 

Transcribed Image Text:

BC2 BCI X BC2 BCI X

Answer rating: 100% (QA)

As compared to budget constraint 1 budget constraint 2 depicts a higher xintercept and a lower y int... View the full answer