Indifference Curve Analysis

1
Indifference Curve Analysis

• Shifting of Budget Lines

2
Price of X increases

• While price of Y and money income are kept
  constant
• (ceteris paribus)

3
Price of X increases
Qy
Qx
4
Price of X increases
Qy
For a normal good X
When Px
M/Py1
M/Px
Qx
Qx1
M/Px1
5
Price of X decreases

• While price of Y and money income are kept
  constant
• (ceteris paribus)

6
Price of X decreases
Qy
Qx
7
Price of X decreases
Qy
For a normal good X
M/Py1
Qx
Qx1
M/Px1
8
Money income increases

• While prices of X and Y
• are kept constant
• (ceteris paribus)

9
Money income increases
Qy
Qx
10
Money income increases
Qy
For a normal good X
When M
M1/Py
M/Px
Qx
Qx1
M1/Px
11
Money income decreases

• While prices of X and Y
• are kept constant
• (ceteris paribus)

12
Money income decreases
Qy
Qx
13
Money income decreases
Qy
For a normal good X
M1/Py
When M
M/Px
Qx
Qx1
M1/Px
14
Humanities Unit Curriculum Development Institute