An increase in income will cause a consumer's budget constraint to
A) shift outward, parallel to its initial position.
B) shift inward, parallel to its initial position.
C) pivot along the horizontal axis.
D) pivot along the vertical axis.

Question

Quizplus · Accepted Answer

An increase in income will allow a consumer to purchase more goods and services, so the budget constraint will shift outward (to the right), while remaining parallel to its initial position because the relative prices of goods and services do not change.

An Increase in Income Will Cause a Consumer's Budget Constraint