Economics, 3rd Edition

A Change in the Price of Pizza 

The opposite happens if the price of pizza were to change but the price 

of cola stayed the same. Assume the price of cola is 

€2 but the price of pizza rises to €12.50. If the con-

sumer devotes all his income to pizza he can now only afford to buy 80 pizzas with his 

€1,000 income. 

The budget constraint would pivot inwards and its slope would change. The ratio of the price of cola to the 

price of pizza is now 

2

12.5

 and the slope is 6.25. The inverse of the slope is 0.16. For every 1 litre of cola 

the consumer acquires he has to give up 0.16 of a pizza and for every 1 extra pizza bought the consumer 

now has to sacrifice 6.25 litres of cola. If the price of pizza falls to 

€8 then the consumer would be able to 

purchase more pizza (125) with his income and so the budget constraint would pivot outwards as shown 

in Figure 5.4.