When income increases, a budget constraint will:
A) shift inward, parallel to its initial position
B) shift outward, parallel to its initial position
C) pivot outward around the Y-axis
D) pivot outward around the X-axis

Question

Quizplus · Accepted Answer

When income increases, the budget constraint shifts outward, parallel to its initial position. This is because with more income, the consumer can afford to consume more of both goods at every price level, expanding their set of affordable options.

When Income Increases, a Budget Constraint Will