In the diagram, the consumer budget line shift from JK to GH. What can definitely…

Economics JAMB 2015

In the diagram, the consumer budget line shift from JK to GH. What can definitely be deduced from the diagram?

  • There has been an increase in the consumer’s money income
  • There has been a reduction in the price of both A and B checkmark
  • There has been no change in the price of A or B
  • There has been no change in the price of A relative to the price of B

The correct answer is: B

Explanation

Since a budget line imposed a constraint on an individual budget that he cannot buy more where the constraint is. An increase in income will make the consumer income higher that the price of the commodity which leads to shift in budget line from JK to GH
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