Exhibit 6A-6 Consumer equilibrium

Given the budget lines and indifference curves shown in Exhibit 6A-6, if the budget line shifts, then the equilibrium points X and Y:
A) result from a decrease in the price of good X.
B) result from a decrease in the consumer's budget.
C) are two points along a downward sloping demand curve for good X.
D) result from a decrease in the price of good Y.

Question

Exhibit 6A-6 Consumer equilibrium
​

Given the budget lines and indifference curves shown in Exhibit 6A-6, if the budget line shifts, then the equilibrium points X and Y:
A) result from a decrease in the price of good X. 
B) result from a decrease in the consumer's budget. 
C) are two points along a downward sloping demand curve for good X. 
D) result from a decrease in the price of good Y.

Quizplus · Accepted Answer

Equilibrium points X and Y represent the optimal combination of goods X and Y that the consumer can afford given their budget constraint and preferences. A shift in the budget line could be caused by a change in income, price of either good X or Y, or a change in consumption taxes. Since we do not know which specific factor caused the shift, we cannot determine whether the equilibrium points resulted from a decrease in the price of good X or Y, or a decrease in the consumer's budget. However, we do know that both points lie on the same demand curve for good X, as they represent different quantities of good X consumed at different prices. Therefore, the correct answer is C.

Exhibit 6A-6 Consumer Equilibrium