Question

graphing tutorial
initial budget
new budget
now suppose paolos income is cut in half : that is, he has 50% less money to spend than he did before.
on the previous graph, use the blue line (circle symbols) to plot paolos new budget constraint.
which of the following statements best summarizes the pattern of causality captured by the graph above? check all that apply.
□ a change in e causes a shift of the budget constraint.
□ the relationship between s and p is not a causal relationship.
□ a change in s causes a change in p.
□ a change in p causes a change in s.

Explanation:

Step1: Analyze the budget - constraint concept

The budget - constraint shows the combinations of two goods (pizza and salad here) that a consumer can afford given their income and the prices of the goods. When income changes, the budget - constraint shifts.

Step2: Evaluate each statement

• For the statement "A change in E causes a shift of the budget constraint": Here, E likely represents income. A change in income (Paolo's income is cut in half) does cause a shift of the budget constraint, so this statement is correct.
• For the statement "The relationship between S and P is not a causal relationship": The budget - constraint shows the trade - off between the two goods based on prices and income, not a causal relationship between the quantities of the two goods themselves. So this statement is correct.
• For the statement "A change in S causes a change in P": There is no causal link between the quantity of salad (S) and the quantity of pizza (P) in the sense of one directly causing the other. The budget constraint just shows the feasible combinations given income and prices. So this statement is incorrect.
• For the statement "A change in P causes a change in S": Similar to the above, there is no direct causal link between the quantity of pizza (P) and the quantity of salad (S). So this statement is incorrect.

Answer:

A change in E causes a shift of the budget constraint.
The relationship between S and P is not a causal relationship.