16. (Figure: Music and Movie Downloads 2) Movie downloads 20- 19 18 16 13 12 10

Question

16. (Figure: Music and Movie Downloads 2) Movie downloads 20- 19 18 16 13 12 10 45 50 Music downloads 5 10 15 20 25 30 35 40 What could have caused the shift of the budget constraint in this figure? A) The price of music downloads decreased. B) The price of movie downloads increased. C) The consumer's income increased. D) The consumer's income decreased. 17. Speculation is A) pondering the meaning of life. B) polluting the price signal by guessing wildly about the future. C) the attempt to profit from future price changes D) a disruption of the normal market mechanism. 18. The difference between what buyers pay for a unit of a good and what sellers receive is known as the A) cost of production. B) tax. C) brokerage fee. D) overhead.

Explanation / Answer

16. D. The consumer's income decreased.

Explanation: Here, the budget constraint shifted towards the left implying that the consumer can afford less quantity of both the goods. This means his/her purchasing power has decreased i.e. his/her income has decreased.

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