(Figure: Income and Substitution Effects) Refer to the figure.What caused this consumer to switch optimal consumptionbundles from Bundle A to Bundle B?

Question

Quizplus · Accepted Answer

An increase in the price of music downloads caused the consumer to switch from Bundle A to Bundle B. The substitution effect caused the consumer to consume less music downloads as the price increased, leading to a shift along the original indifference curve. The income effect caused a decrease in purchasing power given the increase in price, leading to a shift to a lower indifference curve. The combination of the two effects resulted in the consumer choosing Bundle B as the new optimal consumption bundle.

(Figure: Income and Substitution Effects) Refer to the Figure