If an individual's income increases while maximizing utility, what happens to the budget constraint?

When an individual's income increases while they are looking to maximize utility, the budget constraint shifts outward. This is because the budget constraint represents the set of all possible consumption combinations of two goods that a consumer can purchase given their income and the prices of those goods.

As income rises, the consumer has more financial resources available to spend on goods and services. The outward shift of the budget constraint indicates that with the increased income, the consumer can now afford more of both goods compared to before, expanding their purchasing power and consumption possibilities.

Thus, the correct answer highlights how an increase in income effectively enhances the budgetary capacity of the consumer, allowing for a wider range of consumption choices that are accessible, which can lead to greater utility maximization.