Which of the following corresponds to an increase in income? The budget constraint will shift inward in a non-parallel fashion

Economics Apr 01, 2021

Which of the following corresponds to an increase in income?

The budget constraint will shift inward in a non-parallel fashion.
The budget constraint will make a parallel shift outward.
The budget constraint will make a parallel shift inward.
The budget constraint will shift outward in a non-parallel fashion

Expert Solution

The correct option is 2nd "The budget constraint will make a parallel shift outward". An increase in income causes the budget constant to shift outward, parallel to the original line assuming the price is constant.

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