A decrease in income will shift the budget line to the left.

BlackTom题目解析

Question

A decrease in income will shift the budget line to the left.

BlackTom题目解析

BlackTom AI · Accepted Answer

Begin by restating what the question claims: a decrease in income will shift the budget line to the left.
Option 1: True. When income falls, the purchasing power of the consumer decreases while prices remain constant. The budget line, which shows all affordable bundles given current prices, moves inward because each intercept (the maximum quantity of good X or good Y affordable with income) falls. Graphically, both intercepts move closer to the origin, producing a parallel leftward shift if both goods are normal and prices are unchanged. This aligns with standard consumer theory: a drop in income causes the feasible set to contract.
Option 2: False. This would be correct only if we claimed that a decrease in income causes the budget line to shift right or to rotate in a way that increases affordability, which contradicts the basic effect of lower income. The leftward inward shift is the opposite of a rightward expansion, so asserting False would misstate the effect of reduced income on the budget constraint.
Additional nuance: the slope of the budget line depends on relative prices, which are assumed to stay constant in this context. Therefore, the primary effect of a decrease in income is a parallel inward shift (leftward) rather than a change in slope, reinforcing why the True statement is correct under standard assumptions.

A decrease in income will shift the budget line to the left. BlackTom题目解析

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