Chapter 1. eFigure 5.10

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A Consumer's Indifference Curves
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You must read each slide, and complete any questions on the slide, in sequence.
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Question 1 of 3

Question 1.

The price of a restaurant meal has decreased from $12 to $6. What impact will this have on Carlos's budget constraint and consumption of restaurant meals?

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Correct! Carlos’s budget constraint will shift out along the restaurant meal axis since the price of this good dropped and he can now afford more restaurant meals. He will now consume more restaurant meals, though we cannot say that his consumption will double (even though the price fell by half) since his choice of the quantity of restaurant meals will also depend on his preferences and the shape of his indifference curves.
Incorrect! Carlos’s budget constraint will shift out along the restaurant meal axis since the price of this good dropped and he can now afford more restaurant meals. He will now consume more restaurant meals, though we cannot say that his consumption will double (even though the price fell by half) since his choice of the quantity of restaurant meals will also depend on his preferences and the shape of his indifference curves.