If incomes fall, then
A) the budget constraint shifts inward.
B) the budget constraint shifts out.
C) there is no change in the budget constraint.
D) there is no relationship between the budget constraint and income.

Question

Quizplus · Accepted Answer

If incomes fall, the budget constraint shifts inward because the individual can now afford fewer goods and services than before. This means that the set of attainable consumption combinations is smaller, as the individual has less money to spend on goods and services.

If Incomes Fall, Then