Assume the graph shown represents Kerri's budget constraint.If Kerri's income to spend on these two items increased,which of the following would be true?
A) Kerri's budget constraint would shift out, maintaining the same slope.
B) Kerri's budget constraint would shift out, and get steeper.
C) Kerri's budget constraint would shift in, maintaining the same slope.
D) Kerri's budget constraint would shift out, and get flatter.

Question

Assume the graph shown represents Kerri's budget constraint.If Kerri's income to spend on these two items increased,which of the following would be true?
A) Kerri's budget constraint would shift out, maintaining the same slope. 
B) Kerri's budget constraint would shift out, and get steeper. 
C) Kerri's budget constraint would shift in, maintaining the same slope. 
D) Kerri's budget constraint would shift out, and get flatter.

Quizplus · Accepted Answer

If Kerri's income to spend on these two items increases, her budget constraint will shift outwards. This means that the vertical intercept of the budget constraint will increase, while the slope of the line remains the same. This is because the relative prices of the two goods have not changed. Therefore, choice A is the correct answer.

Assume the Graph Shown Represents Kerri's Budget Constraint