Suppose now that Neal’s income changes from $200 to $300. How will this affect his consumption decisions? In Figure 6.10, this change is reflected in a parallel outward shift of the budget
constraint. Since no price change occurs, the slope remains constant. By recomputing the ratio of income to price for each activity, we find that the new snowboard and jazz intercepts are 10
(=$300/$30) and 15 (=$300/$20), respectively. Clearly, the consumer can attain a higher level of satisfaction—at a new tangency to a higher indifference curve—as a result of the size of the
affordable set being expanded. In Figure 6.10, the new equilibrium is at 
.
An income increase shifts the budget constraint from 
to
. This enables the consumer to attain a higher indifference curve. A
price rise in jazz tickets rotates the budget line 
inwards
around the snowboard intercept to 
. The price rise reflects a lower
real value of income and results in a lower equilibrium level of satisfaction.
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