When income increases, the slope of the budget line changes but the intercepts associated with the goods remain the same.

Question

Quizplus · Accepted Answer

When income increases, the intercepts of the budget line change because the consumer can now afford more of both goods, but the slope, which represents the rate at which the consumer can trade one good for another (the price ratio of the two goods), remains the same.

When Income Increases, the Slope of the Budget Line Changes