Question

When income increases, the budget line shifts towards

• A. Left
• B. Right
• C. Downwards
• D. None of these

Hint:

An increase in income results in the outward shift of the budget line, indicating that the consumer can now afford more of both goods.

Answer 1

The Correct Option is B

Step 1: Understanding the budget line.
A budget line shows the combinations of two goods that a consumer can afford given their income and the prices of those goods.

Step 2: Effects of income on the budget line.
When income increases, the consumer can afford more of both goods. This causes the budget line to shift outward, towards the right.
Step 3: Comparison with other options.

• (A) Left: Incorrect. A budget line shifts left when income decreases.
• (B) Right: Correct. An increase in income causes the budget line to shift right, reflecting the consumer's increased purchasing power.
• (C) Downwards: Incorrect. Income changes do not cause the budget line to shift downward.
• (D) None of these: Incorrect. Option (B) is the correct answer.

Step 4: Conclusion.
Therefore, when income increases, the budget line shifts towards the right. Final Answer: Right.