Budget Lines

The following questions refer to the following diagram, which shows the budget lines faced by a consumer last year and this year.

-Refer to Budget Lines.If the consumer purchased basket B last year and purchases basket C this year,we can conclude that
A) the consumer is not behaving optimally.
B) the consumer's tastes changed between this year and last year.
C) the consumer's indifference curves cannot be convex.
D) the law of demand does not hold for this consumer.

Question

Budget Lines

The following questions refer to the following diagram, which shows the budget lines faced by a consumer last year and this year.

-Refer to Budget Lines.If the consumer purchased basket B last year and purchases basket C this year,we can conclude that
A) the consumer is not behaving optimally. 
B) the consumer's tastes changed between this year and last year. 
C) the consumer's indifference curves cannot be convex. 
D) the law of demand does not hold for this consumer.

Quizplus · Accepted Answer

If the consumer has changed their consumption basket from B to C, it indicates that their preferences have changed between the two periods. This change in preferences could be due to various factors, such as a change in income, a change in the prices of goods, or simply a change in taste. However, if the consumer was behaving rationally, they would have chosen the consumption bundle that maximizes their utility given their budget constraint, so we cannot conclude that the consumer is not behaving optimally. The convexity of indifference curves and the law of demand are not directly related to this scenario.

Budget Lines The Following Questions Refer to the Following Diagram, Which Shows