On a Typical Optimal Choice Diagram, with Budget Lines and Indifference

question 9

Multiple Choice

On a typical optimal choice diagram, with budget lines and indifference curves, the line that connects the consumer's optimal baskets as the consumer's income changes holding the prices of the goods constant is called the consumer's:

• A)income-consumption curve.
• B)price-consumption curve.
• C)demand curve.
• D)Engel curve.

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Definitions:

Income Effect

How shifts in someone's or an entire economy's income level influence the demand for goods or services.

Indifference Curve

A graph representing different bundles of goods between which a consumer is indifferent, showing the trade-offs in consumption preferences.

Price Change

An adjustment in the price level of goods or services, which can be influenced by factors like supply and demand, inflation, and market competition.

Income Effect

Variations in personal or economic income and their influence on the demanded quantity of particular goods or services.