Asked by Rileigh Campbell on Jul 05, 2024
Verified
It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.
Budget Line
A graphical representation of all possible combinations of two goods that can be purchased with a given budget at fixed prices.
Shifting Outward
Refers to the expansion of production possibilities or outward movement of the production possibility frontier, indicating economic growth or improvement in resource availability.
- Evaluate the effect of income and price fluctuations on the budget line and preferences of consumers.
- Assess how shifts in the budget line affect consumer choices and relate to economic concepts of normal and inferior goods.
Verified Answer
ZA
Zarylyk ArturJul 06, 2024
Final Answer :
True
Explanation :
When the budget line shifts outward, it indicates that the consumer's purchasing power has increased. While this generally allows for the purchase of more goods, the consumer may choose to buy less of a product if they decide to allocate more of their increased budget towards other goods that they prefer more, reflecting a change in their consumption bundle based on their preferences and the relative prices of goods.
Learning Objectives
- Evaluate the effect of income and price fluctuations on the budget line and preferences of consumers.
- Assess how shifts in the budget line affect consumer choices and relate to economic concepts of normal and inferior goods.