Which of the following statements is true?
A) When a change in income causes consumption to change,the consumption-income line shifts;however,when anything besides income changes,we move along the line.
B) When a change in income causes consumption to change,we move along the consumption-income line;however,when anything besides income changes,the line shifts.
C) When income or anything else affecting consumption changes,we move along the consumption-income line.
D) When income or anything else affecting consumption changes,the consumption-income line shifts.
E) There is no way to determine,without more information,whether a change in income or anything else will shift the consumption line or cause movement along the consumption-income line.

Question

Quizplus · Accepted Answer

According to the basic consumption function, when only income changes, consumption changes proportionally and we move along the consumption-income line. However, when anything else affecting consumption, such as prices or preferences, changes, the whole consumption function shifts, meaning there is a new relationship between consumption and income at all possible income levels. Therefore, statement B is correct.

Which of the Following Statements Is True