Asked by Bailey Hembree on Jun 20, 2024
Verified
Assume that a consumer purchases only two products. Suppose that the consumer's money income doubles, and the prices of the two products also double. These changes in income and prices will result in
A) a shift of the budget line inward to the left.
B) a shift of the budget line outward to the right.
C) no change in the budget line.
D) an increase in the slope of the budget line.
Budget Line
A graphical representation of all possible combinations of two goods that can be purchased with a given income and prices, illustrating consumer choice.
Money Income
The total amount of monetary earnings or receipts over a specified period, not considering the effects of inflation.
Prices
The amounts of money expected, required, or given in payment for something, reflecting the value assigned to goods or services.
- Acquire knowledge about how shifts in income and price influence consumer preferences and budgetary restrictions.
Verified Answer
JD
Jamin DanielJun 25, 2024
Final Answer :
C
Explanation :
The budget line represents the combination of goods a consumer can purchase given their income and the prices of goods. If both the consumer's income and the prices of the products double, the ratio of income to prices remains the same, meaning the consumer can still purchase the same combinations of goods. Therefore, there is no change in the budget line.
Learning Objectives
- Acquire knowledge about how shifts in income and price influence consumer preferences and budgetary restrictions.