An increase in a consumer's income:
A) shifts the consumer's indifference curves out.
B) causes the consumer to buy more of every good.
C) shifts the consumer's budget constraint out.
D) causes the consumer to increase purchases of inferior goods.
E) causes the consumer to buy more inferior goods.

Question

Quizplus · Accepted Answer

An increase in income shifts the consumer's budget constraint outwards, allowing them to purchase more of every good as well as different bundles of goods on higher indifference curves. This increase in income does not necessarily cause the consumer to buy more inferior goods as they may prefer the higher quality of normal goods.

An Increase in a Consumer's Income