When a budget constraint shifts out:
(i) the consumer is better off
(ii) the consumer can now reach a higher indifference curve
(iii) it could only have been caused by an increase in income
A)(i) only
B)(i) and (ii)
C)(i) and (iii)
D)(ii) and (iii)

Question

Quizplus · Accepted Answer

When a budget constraint shifts out, the consumer can afford more goods and services, which makes them better off. This also means that they can reach a higher indifference curve, as they have more choices and can satisfy more of their preferences. The shift could have been caused by an increase in income, but it could also be due to changes in prices or other factors. Therefore, option (iii) is not necessarily true.

When a Budget Constraint Shifts Out