CA Foundation P4 · Chapter 2 · Question 13 of 15
A consumer has an income of Rs. 600 to spend on goods X (Rs. 20 each) and Y (Rs. 30 each). If her income and both prices are doubled, her budget line will:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Remain unchanged
Explanation
The intercepts of the budget line are Income/Px and Income/Py. Originally 600/20 = 30 units of X and 600/30 = 20 units of Y. After doubling: 1,200/40 = 30 and 1,200/60 = 20. The slope -Px/Py = -40/60 = -2/3 is also unchanged. Hence the budget line does not change.
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