12 I1 6el 602 20 In the figure above O A decrease in the price of Good X will ca

Question

12 I1 6el 602 20 In the figure above O A decrease in the price of Good X will cause the budget constraint to move from BC1 to BC2. O Assuming BC1, if the price of X is $3 then the price of Y is $1.50 O From the information in the graph, we cannot construct a demand curve for Good Y OAll of the above are true ONone of the above answers is correct Refer to the figure above. The consumer prefers which of the following? 0 Bundle A to Bundle B Bundle A to Bundle F Bundle B to Bundle C O Bundle C to Bundle E Bundle D to Bundle

Explanation / Answer

1. Ans: All of the above are true.

Explanation:

When price of X decreases, the consumer can buy more quantities of good X. So, Budget constraint moves rightward in X-axis. So, the statement is true.

If the price of good X is $3 , the income of the consumer is $3 * 10 = $30. So, the price of good Y = $30 / 20 = $1.50. So, the second statement is also true.

Demand curve shows the relationship between price of good Yand it's quantity demanded. From the information given in the figure, we cannot draw the demand curve for good Y. So, the third statement is also true.

Thus, all of the above options are true.

2. Ans: Bundle B to C

Explanation:

Bundle C lies in a lower isoquant and bundle B lies in a higher isoquant. The consumer has same amount of expenditure in both the points. As we know a higher isoquant gives higher satisfaction than a lower one. So, the consumer will prefer bundle B to C.

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