Read the following statements - Assertion (A) and Reasoning (R):
Assertion: If there is an increase in the income, the vertical as well as horizontal intercepts increase; there is a parallel outward shift of the budget line.
Reasoning: If the income increases, the consumer can buy more of the goods at the prevailing market prices.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 1
Due to increase in income, the purchasing power of the individual rises. Now, he is able to purchase more of both the goods resulting in a parallel rightward shift in the budget line.