Question

A consumer has 100 dollars to spend on two goods, price of a sweater is $ 10 and price of shoes is $ 20. Assume the consumer’s budget line has shoes on the vertical axis and sweaters on the horizontal axis;

Determine the slope of the budget line _____ (give your answer in decimals)

What is the vertical intercept of the budget line?________

What will be the effect of an increase of income on the budget line______ (use one of the following phrases; rotate outward on horizontal axis, rotate inward on vertical axis, shift inward, shift outward, rotate outward on vertical axis, rotate inward on horizontal axis, remain constant)

Answer 1

When the income of the consumer of the increase, then the consumer can purchase more of both goods shoes and sweater. So the budget line of the consumer shift rightward. All this has been shown in the below diagram.