Answer to Question #151957 in Macroeconomics for Ashwin Roy

Question

Take any two commodities & their utility with hypothetical (Imaginary) figures & draw indifference curve. If your income increases by 50% then which commodity’s consumption will you increases & why? Draw a new indifference curve with increased utilities of the commodity/commodities whose consumption you have increased?

Answer 1

An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility.

If your income increases by 50% then you will increase the consumption of that commodity, which provide higher marginal utility.

A new indifference curve with increased utilities of the commodity/commodities whose consumption we have increased will be to the right from the previous.