Question

Question 1

1-consider a consumer's choice between meat and fish. Use the indifference curves to illustrate the income effect and substitution effect of an increase in the price of fish. (10 marks)

Answer 1

Axis values are measured as quantities.

If the price of fish increases, the indifference curve will shift from 1 to 2. The curve will shift from 1 to 3 if the consumer’s income increases.