Figure 10-6

The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy.
-Refer to Figure 10-6.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?
A)the movement from e to d in Panel A
B)the movement from g to f in Panel B
C)the movement from k to h in Panel C
D)none of the above

Question

Figure 10-6
  
The above panels show various combinations of indifference curves and budget constraints for two products: Popcorn and Candy.
-Refer to Figure 10-6.Which diagram demonstrates a decrease in total utility following an increase in the price of candy?
A)the movement from e to d in Panel A 
B)the movement from g to f in Panel B 
C)the movement from k to h in Panel C 
D)none of the above

Quizplus · Accepted Answer

In Panel C, the movement from point k to point h shows an increase in the price of candy and a resulting decrease in total utility, as the new budget constraint cuts through a lower indifference curve.  In contrast, the movements shown in Panels A and B do not necessarily result in a decrease in total utility.

Figure 10-6 the Above Panels Show Various Combinations of Indifference Curves and Combinations