If the consumer's income decreases while the prices of both goods remain unchanged, what will happen to the budget line?
A)The budget line rotates inward from the intercept on the horizontal axis.
B)The budget line rotates outward from the intercept on the vertical axis.
C)The budget line shifts inward without a change in slope.
D)The budget line shifts outward without a change in slope.

Question

Quizplus · Accepted Answer

When a consumer's income decreases while the prices of goods remain unchanged, the budget line shifts inward without a change in slope because the consumer can now afford less of both goods, but the rate at which they can substitute one good for another (the slope of the budget line) remains the same.

If the Consumer's Income Decreases While the Prices of Both