Question

True or false justify your answer

1-The higher the price of X1 the flatter the B.L would be

2-Consumer equilibrium requires that indifference curve intersects the B.L

3-If B.L slope =zero, then a consumer can have an extra unit of good X without paying additional money

4-Cash subsidy is preferred to gift certificate from the store owner view point

Answer 1

Answer 1 - False

Explanation - If the price of X2 increases , then the Budget line will be steeper . Decrease in the price of X1 will make the curve flatter.

Answer 2 - False

Explanation - A consumer will be in equilibrium when at the point of tangency.

Answer 3 - False

Explanation - The slope of zero means there is a constant relationship between x and y

Answer 4 - False

Explanation - From the store owner point of view, cash subsidy is less preferred than gift certificate.