Using Gabriel's budget line and his indifference curves between horseback riding lessons and baseball lessons,and then changing the prices of each activity holding his income constant,which of the following can be derived?
A) Gabriel's demand curve for each activity
B) Gabriel's supply curve for each activity
C) Gabriel's marginal benefit for each activity
D) Gabriel's net gain for each activity
E) Both answers A and B are correct.

Question

Quizplus · Accepted Answer

Changing the prices while holding income constant will allow us to trace out the different points on Gabriel's demand curve for each activity, showing the quantity of each activity he is willing to purchase at different price levels. Supply curves deal with the behavior of producers, not consumers, so option B is incorrect. Marginal benefit is a concept that deals with the additional satisfaction a consumer gains from consuming one more unit of a good or service, but this concept cannot be derived solely from Gabriel's budget line and indifference curves, so option C is incorrect. Net gain is also not something that can be derived solely from Gabriel's budget line and indifference curves, so option D is incorrect. Option E is incorrect because only answer A is correct.

Using Gabriel's Budget Line and His Indifference Curves Between Horseback