Assume that a consumer purchases only two products. Suppose that the consumer's money income doubles, and the prices of the two products also double. These changes in income and prices will result in
A) a shift of the budget line inward to the left.
B) a shift of the budget line outward to the right.
C) no change in the budget line.
D) an increase in the slope of the budget line.

Question

Assume that a consumer purchases only two products. Suppose that the consumer's money income doubles, and the prices of the two products also double. These changes in income and prices will result in
A) a shift of the budget line inward to the left.	
B) a shift of the budget line outward to the right.
C) no change in the budget line.
D) an increase in the slope of the budget line.

Quizplus · Accepted Answer

The budget line represents the combination of goods a consumer can purchase given their income and the prices of goods. If both the consumer's income and the prices of the products double, the ratio of income to prices remains the same, meaning the consumer can still purchase the same combinations of goods. Therefore, there is no change in the budget line.

Assume That a Consumer Purchases Only Two Products