Maria has a budget of $2,000 per year to spend on travel (assuming the price per trip is equal to $400) and clothes (assuming the price per outfit is equal to $100). What happens to Maria's budget line if her budgeted income rises to $2,100?
A) Her budget constraint will change its slope, indicating a greater ability to go on trips but a more limited ability to buy clothes.
B) Her budget constraint will rotate outward from its intersection with the travel axis.
C) Her budget constraint will rotate outward from its intersection with the clothing axis.
D) The higher income will shift her curve outward with greater ability to buy both types of goods.

Question

Quizplus · Accepted Answer

The budget line shifts outward when income increases, allowing for the purchase of more goods without altering the relative prices of those goods, hence not changing the slope of the budget line.

Maria Has a Budget of $2,000 Per Year to Spend