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Scenario: E-Books and Sports Tickets
Phillip has an income of $300 per month, which he uses to purchase two goods, e-books and sports tickets. Each e-book costs $10, and each ticket costs $15.
-(Scenario: E-Books and Sports Tickets) Read the scenario E-Books and Sports Tickets. Measure e-books on the horizontal axis and sports tickets on the vertical axis. Suppose the price of e-books decreases. Holding everything else constant, Phillip's budget line has become _____, and his optimal consumption bundle will be on a _____ indifference curve.
A) flatter; higher
B) steeper; lower
C) flatter; lower
D) steeper; higher

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Quizplus · Accepted Answer

When the price of e-books decreases, Phillip can buy more e-books for the same amount of money, making the budget line flatter. This allows him to reach a higher indifference curve, indicating a higher level of utility.

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