An increase in an individual's income without changing relative prices will
A)rotate the budget constraint about the X-axis.
B)shift the indifference curves outward.
C)shift the budget constraint outward in a parallel way.
D)rotate the budget constraint about the Y axis.

Question

Quizplus · Accepted Answer

When an individual's income increases, they can afford all the previous consumption bundles as well as the consumption of additional bundles. This results in a parallel outward shift of the budget constraint, without any rotation or change in relative prices. Therefore, option C is the correct answer.

An Increase in an Individual's Income Without Changing Relative Prices