In the graph below, as the consumer moves from indifference curve 1 to 3, his

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Quizplus · Accepted Answer

The movement from indifference curve 1 to 3 indicates an increase in utility level, which implies that the consumer can afford to buy more goods and services. This increase in utility can only be achieved by an increase in real income, which is the purchasing power of income adjusted for inflation. Since nominal income (income in current dollars) is constant in this scenario, the increase in utility must be due to an increase in real income.

In the Graph Below, as the Consumer Moves from Indifference