An increase in money income with constant price results in

Analyze the question

The question asks what happens to the consumer's budget line when money income rises while the prices of goods stay the same.

Concept

The budget line shows all combinations of two goods a consumer can buy with a given income and given prices:

M = Px·X + Py·Y

• Horizontal intercept = M/Px
• Vertical intercept = M/Py
• Slope = −Px/Py

Solution

1. Prices (Px and Py) are constant, so the slope (−Px/Py) does not change. The new line is therefore parallel to the old one.
2. Income (M) increases, so both intercepts (M/Px and M/Py) increase. The line moves away from the origin, which is an outward parallel shift.
3. Checking the other options: • B (inward parallel shift) happens when income falls, so it is wrong. • C ("Options A and C") refers to itself, so it is not a valid choice. This is probably a misprint in the question. • D (budget line remains constant) would only be true if income did not change, so it is wrong.

Answer

An increase in money income with constant prices causes an outward (parallel) shift in the budget line.

Tip

Remember: Income changes → parallel shift. Price changes → pivot (change in slope).

• Income up → shifts outward
• Income down → shifts inward
• Price of one good changes → the line rotates around the intercept of the unchanged good