Question

Question 14 1 pts Suppose there are two goods: food (horizontal axis) and shelter (vertical axis). If income doubles, the price of food doubles, and the price of shelter doubles, then the budget line will be unchanged. budget line will become steeper. budget line will become flatter, budget line will shift outward in a parallel fashion.

Answer 1

Budget line is a graphical representation of all possible combinations of two goods which can ne purchased with given income and prices of two goods.

Suppose a consumer has income of $100. He wants to purchase 2 commodities i.e. Food and shelter. The price of food is $10 and price of each shelter is $20. The possible combinations of spending income will be as follows:

Combinations	Food @ $10 each	Shelter @ $20 each
A	10	0
B	8	1
C	6	2
D	4	3
E	2	4
F	0	5

However, if price of each good doubled and income also doubled, it will be shown as:

Income= $200

Price of food= $20

Price of shelter= $40

It will have following combinations:

Combinations	Food @ $20 each	Shelter @ $40 each
A	10	0
B	8	1
C	6	2
D	4	3
E	2	4
F	0	5

The budget line will be shown as following:

im SHELTERS t W I ul 2. -> 8 20 FooD -

This shows that Budget line will remain the same in both cases and will not shift.

So, the correct option is Budget line will remain unchanged.