Answer to Question #166733 in Microeconomics for Anushka

Question

A consumer consumes two goods X and Y if price of both goods increases by 50% each and income increases by 50% as well what impact would it have on the consumers budget line

Answer 1

If the price of goods X and Y increases, the maximum quantity of the Products decreases at this income level, pushing the budget line inwards towards the origin. When there is an increase in income, a consumer can buy more of both goods and this shows an outward i.e. rightward shift in the budget line.