Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then
A)both her indifference curves and budget constraint change.
B)her indifference curves change, but her budget constraint does not change.
C)her budget constraint changes, but her indifference curves do not change.
D)neither her indifference curves nor her budget constraint change.

Question

Quizplus · Accepted Answer

An increase in income will shift Amy's budget constraint outward, but her preferences (as reflected by her indifference curves) will remain the same. Therefore, her budget constraint will change, but her indifference curves will not.

Hold the Prices of Goods, as Well as Amy's Preferences