In an indifference curve/budget line diagram,generally when the price of a good increases,the consumer purchases
A) less of the good and moves to a lower indifference curve.
B) less of the good and moves to a higher indifference curve.
C) more of the good and moves to a higher indifference curve.
D) more of the good and moves to a lower indifference curve.
E) the same amount of the good and moves to a higher indifference curve.

Question

Quizplus · Accepted Answer

If the price of a good increases, the budget line pivots inwards from the y-intercept, making the consumer's budget constraint tighter. As a result, the consumer can afford to buy less of the good without increasing expenditure beyond their budget. This leads to a movement down along the original indifference curve to a point where the new budget line is tangent to the indifference curve. Hence, the consumer purchases less of the good and moves to a lower indifference curve.

In an Indifference Curve/budget Line Diagram,generally When the Price of a Good