Goods X and Y

For the following questions, assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.

-Refer to Goods X and Y.How would a budget line be affected if income and both prices all simultaneously doubled?
A) It would shift out so that all quantities are doubled.
B) It would shift in so that all quantities are halved.
C) It would not be affected.
D) The slope would be doubled.

Question

Goods X and Y

For the following questions, assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.

-Refer to Goods X and Y.How would a budget line be affected if income and both prices all simultaneously doubled?
A) It would shift out so that all quantities are doubled.
B) It would shift in so that all quantities are halved.
C) It would not be affected.
D) The slope would be doubled.

Quizplus · Accepted Answer

The budget line would not be affected because the relative prices of goods X and Y remain the same, and the consumer's ability to purchase a combination of these goods remains unchanged when income and both prices double simultaneously.