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budget lines before and after inflation and income increase

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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?

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Solution Summary

Comparison of budget lines before and after inflation and income increase are provided.

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a. Ina's budget line is as steep as before. The slope of the budget line is minus the relative prices of the ...

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