Question

An increase in money income:

a. Shifts the consumer's budget line to the right.
b. Shifts the consumer's budget line to the left.
c. Increases the slope of the budget line.
d. Has no effect on the budget line.

Answer 1

Answer:

Option (a) is correct.

Explanation:

When there is an increase in the money income of the consumer then as a result there is an increase in the consumption of both the goods. This will lead to a rightward shift in the budget line.

Now, consumer with a higher level of income will be able to purchase more quantity of both the goods. Higher income increases the affordability of the consumer.

Therefore, an increase in money income will increase the budget of the consumer.