If a consumer is consuming both goods and the price of one of the goods rises, the consumer will experienceGroup of answer choicesa desire to consume a different bundle.a decrease in utility.a southwesterly movement on the indifference map.All of the above.
Question
If a consumer is consuming both goods and the price of one of the goods rises, the consumer will experienceGroup of answer choicesa desire to consume a different bundle.a decrease in utility.a southwesterly movement on the indifference map.All of the above.
Solution
The consumer will experience All of the above.
Here's why:
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A desire to consume a different bundle: When the price of one good rises, the consumer will have to reassess their consumption bundle. They may choose to consume less of the more expensive good and more of the cheaper good, leading to a different consumption bundle.
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A decrease in utility: Utility refers to the satisfaction a consumer gets from consuming goods. If the price of one good rises, the consumer can afford less of that good (assuming their income stays the same). This means they get less satisfaction, or utility, from their consumption.
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A southwesterly movement on the indifference map: An indifference map is a graph showing different bundles of goods, each of which a consumer views as equally preferable. The bundles are plotted on a graph with one good on each axis. If the price of one good rises, the consumer will move to a lower indifference curve, which is typically represented by a southwesterly movement on the graph. This represents a decrease in utility.
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