If a household's money income changes and prices do not change, what happens to the household's real income and budget line?
What will be an ideal response?
A household's real income is the household's income expressed as a quantity of goods the household can afford to buy. For example, the vertical intercept for a budget line measuring soda on the vertical axis is (y/Psoda), which is the consumer's real income in terms of sodas. A change in a household's money income changes the household's real income in terms of both goods and causes a parallel shift of the budget line. If a household's money income increases, its budget line shifts rightward and if a household's money income decreases, its budget line shifts leftward.
You might also like to view...
Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, how much economic profit does the firm make?
A) $0 B) $30 C) -$10 D) -$15
When the price of good X rises, the demand for good Y falls. Explain what this relationship implies about the two goods
What will be an ideal response?
In the late 1800s and early 1900s, the primary source of energy for manufacturing was
a. coal. b. petroleum. c. water. d. electricity.
Why is marginal revenue less than price for every level of output except the first?
What will be an ideal response?