each individual has a budget line in which they follow for expenditures. if the income of the individual increases what is the effect on the budget line?

When an individual's income increases, their budget line, also known as the budget constraint, will be affected. The budget line represents the various combinations of goods or services that an individual can afford to purchase given their income and the prices of those goods or services.

To visualize this concept, let's assume we have a simple two-good world, where an individual can only buy two goods. We'll call them Good 1 and Good 2. The price of Good 1 is denoted by P1, and the price of Good 2 is denoted by P2.

The equation for the budget line is:
Income = (Quantity of Good 1 * Price of Good 1) + (Quantity of Good 2 * Price of Good 2)

Now, let's consider the effect of an increase in income on the budget line:

1. Parallel Shift: Suppose the income of the individual increases while the prices of both goods remain constant. In this case, the budget line will shift parallelly outward from the origin in the graph. This means that the individual now has a higher total income to allocate between the two goods.

2. Pivot: If the income increases and the price of one of the goods remains constant while the price of the other good changes, the budget line will pivot around the price-constant good. This pivot will result in a steeper or flatter budget line depending on whether the price of the good remains constant increases or decreases.

It's important to note that the budget line assumes all income is spent on the goods and does not consider savings or debt. Also, changes in income do not necessarily mean an individual's preferences or tastes have changed, so their choices may or may not reflect the increase in income.

In summary, when an individual's income increases while prices remain constant, their budget line will shift outward, allowing them to purchase more of both goods. However, changes in prices can lead to variations in the slope and position of the budget line.