Question

What happens when the consumer income increases but the price of the goods remains unchanged?

• A. The consumer can buy less of one good
• B. The consumer can buy more of one good
• C. The consumer can buy less of both the goods
• D. The consumer can buy more of both the goods

Answer 1

Answer: (D)

The consumer can buy more of both the goods

As income increases and the prices do not change, the consumer can buy more of both the goods.

This is because the consumer can buy larger quantities of both goods with the same price.

In this case the budget line will shift to the right parallel to the original budget line.