An increase in income with no changes in the price of either good will cause
A)an inward shift of the budget curve.
B)an outward shift of the budget curve.
C)no change in the budget curve.
D)an inward rotation of the budget curve.

Question

Quizplus · Accepted Answer

An increase in income would shift the budget curve outward since the consumer can now afford more of both goods at each given price. There is no change in the price of either good, so there is no rotation or inward shift of the budget curve. Therefore, the best choice is B, an outward shift of the budget curve.

An Increase in Income with No Changes in the Price