Question

What is the difference between a change in income and a change in the price of...

What is the difference between a change in income and a change in the price of one of the goods on the consumer's budget line?

Homework Answers

Answer #1

Change in income- Change in income will shift the the budget line leftward or rightward, if income increases budget line will shift rightward if income decreases budget line will shift leftward ( note that if only income changes slope of the line won't change)

Change in price- With the change price budget line will pivot means slope of the line will change and budget line will become steeper or flater.

If price of good 1 increases budget line will become steeper

If price of good 1 decreases budget line will become flater

If price of good 2 increases budget line will become flater

If price of good 2 increases budget line will become steeper

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