Suppose that the price of good x triples and the price of good y doubles while income remains constant.On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis, the new budget line

A) is flatter than the old one and lies below it.
B) is flatter than the old one and lies above it.
C) crosses the old budget line.
D) is steeper than the old one and lies below it.
E) is steeper than the old one and lies above it.

Question

Amrit Sandhu · Accepted Answer

Final Answer : D, Explanation :  When the price of good x triples and the price of good y doubles while income remains constant, the budget line becomes steeper because the relative price of good x (on the horizontal axis) increases more than the price of good y (on the vertical axis). The budget line also lies below the old one because the consumer can now afford less of both goods with the same income.

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