Consider a budget line drawn with apples on the vertical axis and oranges on the horizontal axis.The consumer's income is $100,the price of apples is $5,and the price of oranges is $10.Suppose the consumer's income falls to $75.00,but the prices of apples and oranges remain unchanged.The change in income produces a:
A)parallel shift inward of the indifference curves.
B)new budget line which is steeper than the original one.
C)parallel shift inward of the budget line.
D)new budget line which is flatter than the original one.

Question

Quizplus · Accepted Answer

A decrease in income with no change in prices would cause a parallel shift inward of the initial budget line. The new budget line would be parallel to the original one, but shifted leftward.

Consider a Budget Line Drawn with Apples on the Vertical