An income consumption curve (shown on an indifference map with Ben's income on the horizontal axis and Jerry's income on the vertical axis)is positively sloped.Given that the indifference curves on the map are downward sloping,which of the followings statements is true?
A)Jerry views charitable donations to Ben as an inferior good.
B)Altruism cannot be accurately captured using indifference curves.
C)Charitable giving to Ben is a normal good for Jerry.
D)Jerry views Ben's income as an economic bad.

Question

Quizplus · Accepted Answer

A positively sloped income consumption curve implies that as Jerry's income increases, so does his consumption of charitable donations to Ben. Since the indifference curves are downward sloping, Jerry prefers more of both goods (his own consumption and charitable giving to Ben). Therefore, charitable giving to Ben is a normal good for Jerry. Option A is incorrect because Jerry's view on charitable donations has not been mentioned. Option B is incorrect because indifference curves can capture altruism, but it depends on the context and assumptions made in the model. Option D is incorrect because a positively sloped income consumption curve can only occur if Jerry sees Ben's income as a normal good rather than an economic bad.

An Income Consumption Curve (Shown on an Indifference Map with Ben's