What happens to the budget set if the prices as well as the income double?

If the prices and the income are doubled, then the budget line will remain unchanged.

M1 = Rs 20

M2 = Rs 40

P1 = Rs 4

= Rs 8

P2 = Rs 5

= Rs 10

Horizontal intercept

Vertical intercept

Slope

Hence, the vertical intercept, the horizontal intercept and the slope of the budget line will remain the same. The new budget line will be the same as the old budget line but associated with higher income and higher prices of both the goods.

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