If the prices of both goods and income increase by the same percentage,what will happen to the budget line?
A) The budget line rotates inward from the intercept on the axis of the good that did not change in price.
B) The budget line rotates outward from the intercept on the axis of the good that did not change in price.
C) The budget line shifts outward without a change in slope.
D) Nothing.

Question

Quizplus · Accepted Answer

If both the prices of goods and income increase by the same percentage, there will be no change in the relative price of goods, and hence, the slope of the budget line will remain unchanged. Therefore, the budget line will shift outwards parallel to the original one, without any change in slope.

If the Prices of Both Goods and Income Increase by the Same