Question

14. Inflation increases the prices of all goods by 20%. At the same time, Ina’s income increases from $50,000 to $55,000. Compare the situation after both of these changes have happened with the situation before any of these changes have happened.
a. After these changes, has Ina’s budget line become steeper, less steep, or equally as steep compared to before?
b. After these changes, has Ina’s budget line shifted outward, inward, or not at all, compared to before?

Answer 1

Thank you for using the Jiskha Homework Help Forum. If inflation has increased everything by 20% and Ina's income has only increased 10%, she's still behind the times! Her budget will never stretch to cover the increased costs.

Sra