Question

29) Nick has $300 a month to spend on detailing his sports car or buying bottles of good wine. It costs $100 to have his car detailed and $50 for a bottle of wine. He currently buys four bottles of wine and has his car detailed once a month. If the price of detailing his car decreased to $75, Nick's budget constraint:

A) would shift straight outward, because he is relatively wealthier.

B) would shift straight inward because he is relatively wealthier.

C) would rotate because relative prices have changed.

D) One cannot determine what would happen without knowing Nick's marginal utility of each good.

Please explain why not choose A

Answer 1

A) A budget line shifts straight outwards only when income changes , slope remains constant .

B) Straight inward when income decreases

C) Change in price causes change in slope as relative price is slope of budget line . So here the line rotates