Question

With an increase in income, we can predict that a consumer will choose a new market basket on a lower indifference curve. on the same indifference curve but the new budget line. on a higher indifference curve that is tangent to the new budget line on a higher indifference curve that passes through the new budget line.

Answer 1

on a higher indifference curve that is tangent to the new budget line

Step-by-step explanation:

When there is an increase in the income of the consumer it implies that the consumer will be consume more of both the goods.

The budget line of the consumer will shift to the right. The consumer will now consume a bundle at a higher indifference curve to increase consumption of both the goods.

The optimal bundle will be where the higher indifference curve is tangent to the new budget line.