Assume that a consumer purchases only two products and there is a decrease in the consumer's income. The prices of the two products stay constant. The decrease in income will result in a:
A) Shift of the budget line inward to the left
B) Shift of the budget line outward to the right
C) A decrease in the slope of the budget line
D) An increase in the slope of the budget line

Question

Quizplus · Accepted Answer

A decrease in income will result in a decrease in the consumer's purchasing power. This will cause the budget line to shift inward to the left, as the consumer is now able to afford less of both products at all possible combinations. The prices of the products staying constant means that the slope of the budget line will not change.

Assume That a Consumer Purchases Only Two Products and There