Goods X and Y

For the following questions, assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.

-Refer to Goods X and Y.Which of the following can cause a parallel,outward shift in the budget line?
A) A rise in the consumer's income.
B) A rise in the marginal value of X in terms of Y.
C) A fall in the price of good X.
D) A fall in the price of good Y.

Question

Goods X and Y

For the following questions, assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.

-Refer to Goods X and Y.Which of the following can cause a parallel,outward shift in the budget line?
A) A rise in the consumer's income.
B) A rise in the marginal value of X in terms of Y.
C) A fall in the price of good X.
D) A fall in the price of good Y.

Quizplus · Accepted Answer

A rise in the consumer's income would cause an outward shift in the budget line, as the consumer can afford to purchase more of both Goods X and Y at all price levels. Choices B, C, and D would cause a rotation in the budget line, not a parallel shift.