Michael can buy either pizzas or submarine sandwiches. If the prices of pizzas and submarine sandwiches double and Michael's money income triples, we can conclude that Michael's budget constraint will
A) shift in but remain parallel to the old one.
B) shift out but remain parallel to the old one.
C) swivel in so that the slope of the budget constraint is doubled.
D) remain unchanged.

Question

Quizplus · Accepted Answer

When the prices of goods double and income triples, the budget constraint shifts outward because Michael can now buy more of both goods than before, even though the prices have increased. The budget line remains parallel because the relative price of pizzas to submarine sandwiches remains the same.

Michael Can Buy Either Pizzas or Submarine Sandwiches