Asked by Ivanna Garcia on Jun 23, 2024

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If money income increases and the prices of products A and B both increase,then the budget line:

A) must shift to the right.
B) must shift to the left.
C) may shift either to the right or the left,or not at all.
D) will no longer be tangent to an indifference curve.

Money Income

Refers to the total income received in monetary form, including wages, salaries, and other income sources.

  • Explore how changes in financial status and price levels affect consumer selections and the outline of the budget line.
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CM
Chyna McDonaldJun 24, 2024
Final Answer :
C
Explanation :
When money income increases, the budget line shifts outward (to the right). However, if the prices of both products A and B increase proportionately, the slope of the budget line remains the same, and the line will simply shift parallelly to the right. Therefore, the budget line may shift either to the right or to the left, or not at all, depending on the extent of the price increases relative to the income increase. The budget line will still be tangent to an indifference curve, so option D is incorrect.