CFA Practice Question

There are 923 practice questions for this topic.

CFA Practice Question

The following figure shows Bobby's indifference map for soda and juice. B1 indicates his original budget line. B2 indicates his budget line resulting from a decrease in the price of soda. What change in quantity best represents his substitution effect?

A. 3
B. 7
C. 10
Explanation: 18 - 15 = 3

User Contributed Comments 4

User Comment
ybavly This cant be right... his new budget line is B2 so it has to be 25 - 18 (or 15, its hard to read)

Can anyone explain?
Shcote Substitution is the key word
safash New Budget line must be considered only for income effect
nirens Ahhhhhh...!
You need to log in first to add your comment.