An equal proportional increase in money income and all money prices will

Question

Quizplus · Accepted Answer

An equal proportional increase in money income and all money prices will leave the position of the budget line unchanged. This is because an increase in income would make the consumer able to afford more of all goods (since their relative prices have not changed), but a proportional increase in prices would make all goods more expensive by the same proportion. Therefore, the amount of goods the consumer can afford with their increased income remains the same and the budget line will stay in the same position.

An Equal Proportional Increase in Money Income and All Money