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If the price of a product falls which of the following would occur?

A. Indifference curves shift down

B. Budget line shifts down

C. Indifference curve shift up

D. Budget line pivots

Correct Answer : D.



If the price of productB falls the budget line now pivots. The consumer now maximises utility consuming Q3 of product A and Q4 of product B. The fall in the price of product B has led to an increase in quantity demanded.}

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