If we observe that a consumer's budget constraint has shifted outward, we can assume that the consumer will buy
A)fewer normal goods and more inferior goods.
B)more normal goods and fewer inferior goods.
C)more normal goods and more inferior goods.
D)fewer normal goods and fewer inferior goods.

Question

Quizplus · Accepted Answer

When a consumer's budget constraint shifts outward, it means that the consumer now has more purchasing power and can afford to buy more goods. As a result, they will likely buy more normal goods, which are goods that they prefer and have a positive income elasticity. Since the consumer now has more income, they are less likely to purchase inferior goods, which are goods that they only purchase when they are unable to afford their preferred normal goods. Therefore, the consumer will buy more normal goods and fewer inferior goods.

If We Observe That a Consumer's Budget Constraint Has Shifted