Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They only affect the quantity of goods purchased but not the overall satisfaction.
B
They change the intersection points of the indifference curves with the budget line, affecting consumption choices.
C
They have no impact on the total utility derived from consumption.
D
They only affect the prices of goods without influencing consumer preferences.
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer's budget constraint changes, it affects how they choose between different goods. The budget constraint shows the limit of what the consumer can afford, and a shift can mean they have more or less money to spend. If their budget increases, they can buy more of both goods, which can lead to higher total utility, or satisfaction, because they can enjoy more of what they like. Indifference curves, which represent combinations of goods that give the same satisfaction, will also shift; the consumer may move to a higher curve, meaning they can reach a higher level of satisfaction with their new budget. For example, if someone can now afford both pizza and ice cream after a raise, they might choose to buy more of each, increasing their overall happiness.
Detailed Explanation
When a consumer's budget changes, it can change where the budget line meets the indifference curves. Other options are incorrect because This idea suggests that only the amount of goods changes, not the happiness from them; This option implies that total happiness from goods stays the same.
Key Concepts
Total utility
Indifference curves
Utility and market demand.
Topic
Marginal Utility and Budgeting
Difficulty
hard level question
Cognitive Level
understand
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