An increase in income will cause the budget constraint to shift outward and will allow the consumer to be able to choose between two possible optimum choices.

Question

Quizplus · Accepted Answer

An increase in income shifts the budget constraint outward, allowing a consumer to afford more expensive or additional combinations of goods, but it does not inherently create only two possible optimum choices. The number of optimum choices depends on preferences and the prices of goods, not just income changes.

An Increase in Income Will Cause the Budget Constraint to Shift