Answer
Answer: D
Work Step by Step
Emilio's original budget constraint:
Pizza=10
Soda=50
The exchange between the two goods is 5 sodas for every 1 pizza (50÷10 = 5)
For Emilio's budget constraint curve to shift parallel outward he will need 2 things to happen:
1) Maintain the ratio that he can consume 5 sodas for every 1 pizza
2) Be able to consume >50 sodas and >10 pizzas
In option D Emilio is able to consume 20 pizzas (400÷20 = 20), and 100 sodas (400÷4 = 100).
The answer is D because it satisfies the 2 things that it needed to do:
1) Emilio is still consuming 5 sodas for every 1 pizza (100÷20 = 5)
2) Emilio is consuming > 50 sodas and > 10 pizzas (100>50, and 20>10)
