Refer to the diagram. If the budget line shifts from ab to ac, the
A) consumer's level of total utility will increase.
B) consumer will purchase more of both J and K.
C) consumer will purchase less of both J and K.
D) consumer will purchase more of J and less of K.

Question

Refer to the diagram. If the budget line shifts from ab to ac, the 
A) consumer's level of total utility will increase. 
B) consumer will purchase more of both J and K. 
C) consumer will purchase less of both J and K. 
D) consumer will purchase more of J and less of K.

Quizplus · Accepted Answer

When the budget line shifts from ab to ac, the consumer's budget constraint becomes less tight. This means that the consumer can buy more of both goods J and K, or buy more of one and less of the other. As a result, the consumer is likely to purchase more of good J and less of good K, because the slope of the new budget line is steeper than that of the original budget line (ab). This means that the relative price of good J has become relatively cheaper compared to good K, making it more attractive to the consumer. Therefore, the consumer will choose to allocate more of their budget towards purchasing good J and less towards good K.

Refer to the Diagram