If money income increases and the prices of products A and B both increase, then the budget line
A)must shift to the right.
B)must shift to the left.
C)may shift either to the right or the left, or not at all.
D)will no longer be tangent to an indifference curve.

Question

Quizplus · Accepted Answer

The budget line's shift depends on the relative increase in money income versus the price increases of products A and B. If income increases more than prices, the budget line could shift right, indicating more purchasing power. If prices increase more than income, it could shift left, indicating less purchasing power. If the increases offset each other, the budget line might not shift at all.

If Money Income Increases and the Prices of Products a and B