An increase in income (all else equal) will ALWAYS lead to a ...

[K@]

An increase in income (all else equal) will ALWAYS lead to a parallel shift of the budget line.
 
  Indicate whether the statement is true or false

Question 2

An individual derives utility from games, g (y-axis), and toy airplanes, a (x-axis), described by the utility function U(g,a) = g0.6a0.4. The price per game is 20 and the price of toy airplanes is 10. Using the slope of the income consumption curve (ICC), determine whether games and toy airplanes are normal or inferior goods when income increases from 100 to 200.
 
  A) Both goods are normal goods with an ICC slope of 3/4.
  B) Both goods are normal goods with an ICC slope of 4/3.
  C) Both goods are inferior goods with an ICC slope of -4/3.
  D) Both goods are inferior goods with an ICC slope of - 3/4.

[tuwy]

Answer to Question 1

True . Since prices are unchanged the relative prices of the goods stays the same and thus the slope of the budget line.

Answer to Question 2

A