A consumer has ₹120; P₁ = ₹6 and P₂ = ₹4. Income rises to ₹180 and P₁ rises to ₹9. What happens to the budget line?

The good-1 intercept stays at 20; the good-2 intercept rises from 30 to 45Correct answerYour answerBoth intercepts rise by halfCorrect answerYour answerNothing changesCorrect answerYour answerThe good-1 intercept rises from 20 to 30Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Good-1 intercept: before 120 ÷ 6 = 20, after 180 ÷ 9 = 20, unchanged.
Good-2 intercept: before 120 ÷ 4 = 30, after 180 ÷ 4 = 45. The line pivots outward on the good-1 axis.

Concept: Two changes at once
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsWhen income or prices change

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A consumer has ₹120; P₁ = ₹6 and P₂ = ₹4. Income rises to ₹180 and P₁ rises to ₹9. What happens to the budget line?

Explanation