The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3

-With an increase in income, the consumer will maximize utility on a new indifference curve that represents a higher level of utility.

Question

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
 
-With an increase in income, the consumer will maximize utility on a new indifference curve that represents a higher level of utility.

Quizplus · Accepted Answer

An increase in income allows a consumer to purchase more goods and services, thereby expanding the set of available consumption choices. This results in a higher level of utility, which can be represented by a new, higher indifference curve. As the consumer's income increases, they can afford to consume more of both goods X and Y or choose to consume more of one good while maintaining the same level of consumption of the other, resulting in a new utility-maximizing combination of goods X and Y.

The Below Figure Shows the Various Combinations of the Goods