An increase in consumer income will
A) shift the budget constraint and increase its slope.
B) reduce consumption of all normal goods.
C) pivot the budget constraint on the axis with the good that has the higher price.
D) shift out the budget constraint and increase the consumption of both goods, if they are normal goods.

Question

Quizplus · Accepted Answer

An increase in consumer income will shift out the budget constraint, allowing for higher consumption of both goods if they are normal goods. This is because the consumer can now afford more of both goods at the given prices.

An Increase in Consumer Income Will