What happens to a consumers optimal choice of goods if all p

What happens to a consumer\'s optimal choice of goods if all prices and the consumer\'s income double? (What happens to the intercepts of the budget constraint?)

Solution

Solution:

When all prices and income double, there is no change in the budget constraint resulting into no change in the optimal choice of goods. Priorto the price change the budget constraint is

p1q1 + p2q2 = Y

And after the price change the budget constraint is

(2p1)q1 + (2p2)q2 = 2Y. This implies, p1q1 + p2q2 = Y