If we observe that Rae's budget constraint has shifted outward,then we know for certain that
A) her income must have increased.
B) she will be indifferent between goods X and Y.
C) the price of one or both of the goods must have decreased.
D) she can reach a higher indifference curve.

Question

Quizplus · Accepted Answer

If Rae's budget constraint has shifted outward, it means that she can now afford more of both goods X and Y at the same prices. This could be due to an increase in her income or a decrease in the price of one or both of the goods. However, it is not certain that her income has increased, as the shift could be due to a decrease in the price of one or both of the goods. Additionally, she will not necessarily be indifferent between goods X and Y, as the relative prices of the goods may have changed. However, she will be able to reach a higher indifference curve, as she can now afford more of both goods.

If We Observe That Rae's Budget Constraint Has Shifted Outward,then