Figure 13.1 -Refer to Figure 13.1.All else equal,a decrease in income taxes would best be represented by a movement from A) point A to point B. B) point B to point A. C) point B to point C. D) point C to point B.

Question

Quizplus · Accepted Answer

A decrease in income taxes would lead to an increase in disposable income, which would shift the budget constraint outward. This outward shift would result in a movement along the same indifference curve to a higher level of consumption. Thus, the movement from point B to point A represents an increase in consumption due to the decrease in income taxes.

Figure 13.1 -Refer to Figure 13.1.All Else Equal,a Decrease in Income Taxes