Aaron buys peanut butter and jelly. An increase in the price of both goods has a similar effect to a(n) _____ in income, making the budget line shift _____.
A) increase; outward
B) increase; inward
C) decrease; outward
D) decrease; inward

Question

Quizplus · Accepted Answer

An increase in the price of goods reduces the quantity of goods that can be purchased with a given income, similar to the effect of a decrease in income, thus shifting the budget line inward.

Aaron Buys Peanut Butter and Jelly