If prices and income all change by the same proportion
A) The budget line shifts out
B) The budget line shifts in
C) The budget line rotates outward
D) The budget line doesn't change

Question

Quizplus · Accepted Answer

If prices and income change by the same proportion, the relative prices of goods in the consumer's budget stay the same. Consequently, the consumer's purchasing power remains constant, and the budget line does not shift or rotate. Hence, the correct choice is D.

If Prices and Income All Change by the Same Proportion