Assume that a consumer purchases only two products. Suppose that the consumer's money income doubles, and the prices of the two products also double. These changes in income and prices 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) no change in the budget line.
D) an increase in the slope of the budget line.

Question

Quizplus · Accepted Answer

When the consumer's money income doubles and the prices of both products also double, the consumer's purchasing power remains the same. Therefore, the budget line does not shift inward or outward. Instead, it rotates inward but parallel to the original budget line, meaning the consumer can still purchase the same combination of goods as before. Thus, the answer is C, no change in the budget line.

Assume That a Consumer Purchases Only Two Products