7.2.2—Budget line shifts

A rise in income shifts the budget line outward in parallel; a fall shifts it inward. A change in one good’s price rotates the line because one intercept changes while the other stays fixed.

The slope changes with relative prices, not with income. The new best affordable bundle depends on preferences, so the same budget-line movement can produce different quantities for different consumers.

If income rises from $60 to$80 with prices unchanged, both intercepts increase by one-third. If X’s price falls while Y’s price stays fixed, the X-intercept moves outward and the Y-intercept is unchanged.

A parallel shift is not caused by a single price change, and a budget-line change alone does not tell you whether demand for a good rises or falls.