If a household's money income changes and prices do not change, ...

[SGallaher96]

If a household's money income changes and prices do not change, what happens to the household's real income and budget line?
 
  What will be an ideal response?

Question 2

If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?
 
  A) It falls by 162 percent. B) It rises.
  C) It falls. D) It rises by 1.62 percent.

[CharlieArnold]

Answer to Question 1

A household's real income is the household's income expressed as a quantity of goods the household can afford to buy. For example, the vertical intercept for a budget line measuring soda on the vertical axis is (y/Psoda), which is the consumer's real income in terms of sodas. A change in a household's money income changes the household's real income in terms of both goods and causes a parallel shift of the budget line. If a household's money income increases, its budget line shifts rightward and if a household's money income decreases, its budget line shifts leftward.

Answer to Question 2

C