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When consumer’s income increases, the budget line on indifference curve shifts to
- a)A parallel position to the left
- b)A parallel position to the right
- c)A parallel position to the origin
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
When consumer’s income increases, the budget line on indifferenc...
The correct answer is, A parallel position to the right.
- Indifference Curve is a graphic representation which shows different combination of two commodities that yield the same satisfaction and utility to the consumer.
- Budget Line graphically shows the different possible combination of two commodities within the limited income of consumer, which means that the consumer can afford it (provided that price of commodity and income of a consumer remains same).
- Change in Income concept states that, when the income of a consumer increases, the budget line will shift to right. The new equilibrium for more income is higher on budget line as the greater income allows the customer to buy more of the both commodities/ products.
- For Example: If the income of a consumer increases with Rs.100, then he/ she can purchase more of both goods/ commodities. So, it will shift the budget line on upward direction, however the new budget line will be parallel to the old one.
Most Upvoted Answer
When consumer’s income increases, the budget line on indifferenc...
Explanation:
Increased income leads to a shift in the budget line on the indifference curve. This shift occurs because the consumer now has more purchasing power and can afford to buy more goods and services.
Parallel Position to the Right:
When a consumer's income increases, the budget line shifts to a parallel position to the right. This means that the consumer can now afford to purchase more goods and services at any given price level. The new budget line represents the increased purchasing power of the consumer due to the higher income.
Effect on Consumption:
With the budget line shifting to the right, the consumer can now consume more of both goods and services. This leads to an expansion in the consumption possibilities for the consumer, allowing them to choose a higher level of utility.
Impact on Indifference Curve:
The indifference curve remains the same, representing the consumer's preferences and the level of satisfaction derived from different combinations of goods and services. However, the shift in the budget line allows the consumer to reach a higher level of utility by choosing a point on the indifference curve that was previously unattainable due to budget constraints.
Conclusion:
In conclusion, when a consumer's income increases, the budget line shifts to a parallel position to the right, enabling the consumer to consume more goods and services and reach a higher level of utility.
Increased income leads to a shift in the budget line on the indifference curve. This shift occurs because the consumer now has more purchasing power and can afford to buy more goods and services.
Parallel Position to the Right:
When a consumer's income increases, the budget line shifts to a parallel position to the right. This means that the consumer can now afford to purchase more goods and services at any given price level. The new budget line represents the increased purchasing power of the consumer due to the higher income.
Effect on Consumption:
With the budget line shifting to the right, the consumer can now consume more of both goods and services. This leads to an expansion in the consumption possibilities for the consumer, allowing them to choose a higher level of utility.
Impact on Indifference Curve:
The indifference curve remains the same, representing the consumer's preferences and the level of satisfaction derived from different combinations of goods and services. However, the shift in the budget line allows the consumer to reach a higher level of utility by choosing a point on the indifference curve that was previously unattainable due to budget constraints.
Conclusion:
In conclusion, when a consumer's income increases, the budget line shifts to a parallel position to the right, enabling the consumer to consume more goods and services and reach a higher level of utility.
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Community Answer
When consumer’s income increases, the budget line on indifferenc...
The correct answer is, A parallel position to the right.
- Indifference Curve is a graphic representation which shows different combination of two commodities that yield the same satisfaction and utility to the consumer.
- Budget Line graphically shows the different possible combination of two commodities within the limited income of consumer, which means that the consumer can afford it (provided that price of commodity and income of a consumer remains same).
- Change in Income concept states that, when the income of a consumer increases, the budget line will shift to right. The new equilibrium for more income is higher on budget line as the greater income allows the customer to buy more of the both commodities/ products.
- For Example: If the income of a consumer increases with Rs.100, then he/ she can purchase more of both goods/ commodities. So, it will shift the budget line on upward direction, however the new budget line will be parallel to the old one.
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