How will an increase in the consumer's income affect the budget line?

Parallel outwards shift in budget line.

The correct answer is Option (2) → Parallel outwards shift in budget line.

• The budget line represents all combinations of two goods a consumer can purchase with their given income and fixed prices.

• When the consumer's income increases, and prices remain unchanged, the consumer can now afford more of both goods.

• This causes a parallel outward shift of the budget line — it moves away from the origin but keeps the same slope (since prices haven’t changed).