Practise indifference curve and budget line analysis using diagrams, price and income changes, and consumer choice evaluation.
The diagram shows budget lines for an individual consumer.
What could explain the shift in the budget line from QR to ST?
a decrease in the consumer's real income
a decrease in the quality of both goods
an increase in the consumer's money income
an increase in the price of both goods
The diagram shows a consumer's budget line.
What determines the slope of the budget line?
the marginal rate of substitution of good X for good Y
the price of good X multiplied by the price of good Y
the ratio of the price of good X to the income of the consumer
the ratio of the price of to the price of
Which feature of indifference curve theory is most likely to apply in reality?
The consumer can express preferences between all possible combinations of goods.
The consumer has a limited income to spend.
The consumer will always behave rationally.
The consumer will always get positive utility from having more of the goods.
With the help of a diagram, evaluate the use of indifference curve analysis to explain the relationship between a change in the price of a product and the change in an individual consumer's demand for this product.
[20]
OR
