Another Econ Question help pls!?

Question

My exam questions. Take home's. Please help.

The indifference curve yields a person 100 unit of utility. If his money were to increase by 20%, the indifference curve will

a. shift leftward

b. shift rightward.

c. become steeper.

d. not be affected.

Trust me, no virus or any of the sort. @@

An indifference curve is something like http://www.thebestlinks.com/images/7/73/Indifference_curve.png

except its only one line, not three.

Thanks in advance!

Answer 1

The correct answer is :

d. not be affected

Indifference curve represents the different combination of two goods consumed that yield the same level of utility or satisfaction. say 100 utils. Any increase in i9ncome cannot change this indifference curve. However with higher level of income a cosumer is likely to shift away from the 100util indifference curve to a higher (sa 120 util) indifference curve, with prices remaining the same. But the 100-util indifference curve will not shift.

It is the income or budget constraint that will shift and hence will be tangential to higher utility indifference curve a define a new equilibrium demand position.

Answer 2

b. shift rightward.

Actually there will be switch to another indifference curve due to higher budget line, and this new indifference curve (providing higher total utility for new higher budget due to increase in income) lies a bit outward from origin - as your link says from '11' to '12' or '13'

Some books mean that there is no change in indifference curve (thus answer "d" might be right) but switch to another indifference curve.

Answer 3

d shift rightward with budget lne assuming monootonous preference, else results would b diff ex d if satition is rchd.