An increase in income
A)causes a change in consumer preferences.
B)causes total utility to increase.
C)does not shift a consumer's demand.
D)is assumed to have no effect on consumer expenditures.
E)has no effect on a consumer's budget constraint.

Question

Quizplus · Accepted Answer

An increase in income will cause a shift in a consumer's budget constraint, as it increases the amount of money that can be spent on goods and services. This, in turn, will lead to an increase in total utility, as the consumer can afford to consume more goods and services. However, an increase in income does not necessarily cause a change in consumer preferences, and it may result in a shift in demand for certain goods and services.

An Increase in Income