Assume that a consumer purchases only two products and there is a decrease in the consumer's income. The prices of the two products stay constant. The decrease in income will result in
A) a shift of the budget line inward to the left.
B) a shift of the budget line outward to the right.
C) a decrease in the slope of the budget line.
D) an increase in the slope of the budget line.

Question

Quizplus · Accepted Answer

A decrease in income will result in a decrease in the consumer's purchasing power. As a result, the consumer will have to reduce their spending on one or both of the products. This will cause the budget line to shift inward to the left, indicating a decrease in the quantity of both products that the consumer can afford. The prices of the two products staying constant means that the slope of the budget line remains the same.

Assume That a Consumer Purchases Only Two Products and There