Economics · Consumer Theory
Consider the budget constraint and its shifts. Which of the following are CORRECT? A. A proportionate increase in all prices (Px, Py) with money income M unchanged rotates the budget line inward. B. A lump-sum subsidy shifts the budget line outward in a parallel manner. C. An ad valorem subsidy on good X rotates the budget line outward around the Y-intercept. D. If the price of X rises while the price of Y and income remain unchanged, the X-intercept of the budget line shifts inward but the Y-intercept is unchanged. E. A reduction in income with unchanged prices shifts the budget line inward parallel to itself.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A, B, C, D and E
- 2A, B, C and D only
- 3B, C, D and E only✓
- 4A and D only
Correct answer
B, C, D and E only
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