Economics 9708 · AS & A Level
Indifference curves and budget lines
100 practice questions on Indifference curves and budget lines, with worked solutions and instant marking.
The diagram illustrates two indifference curves together with two budget lines for goods X and Y. The starting point is P. The movement from P to R represents a substitution effect. The movement from R to S represents an income effect. What kind of good is good X?
Feb/March 2016
The diagram shows various combinations of good X and good Y. A consumer likes having more of both goods rather than less, but would, whenever possible, avoid sacrificing any good Y in order to gain more good X. Which combination shown in the diagram could fit the consumer’s ranking of preferences from highest to lowest?
Feb/March 2017
A consumer buys two goods, X and Y. An indifference curve diagram illustrates what happens to the consumer’s equilibrium when the price of one of these goods changes. Which demand curve can be inferred from the diagram?
Feb/March 2017
Explain what consumer equilibrium means in economic theory.
Feb/March 2017
In the diagram, the consumer’s budget line changes from JK to GH. Which statement must be true?
Feb/March 2018
The table sets out substitution and income effects for a normal good and for an inferior good as the good’s price changes. Which combination is correct?
Feb/March 2018
Explain how indifference curve theory predicts that a consumer will respond to changes in income and to changes in the price of a product in order to maximise satisfaction. Consider whether the use of 'nudge' theory (persuasion) conflicts with this theory of maximising satisfaction.
Feb/March 2018
In the indifference curve diagram, point M shows the consumer’s starting equilibrium, JK and JL represent budget lines, and MN is the substitution effect of a decrease in the price of good X. If good X is a Giffen good, which point will be the consumer’s new equilibrium point after the price of good X falls?
Feb/March 2019
Selina receives an income of $100 and purchases food and drink. One unit of food costs $2, whereas one unit of drink costs $1. Which pattern of spending would indicate that Selina intends to save part of her income?
Feb/March 2019
Explain why indifference curves are generally drawn convex to the origin, slope downward and never intersect one another.
Feb/March 2019
The diagram illustrates a consumer’s indifference curves together with a budget line for electronic goods and food. Assuming income and prices do not change, which point on the diagram will enable the consumer to maximise satisfaction?
Feb/March 2020
Explain how a consumer’s rational behaviour, marginal utility, prices of different goods and the demand for a good are related.
Feb/March 2020
One utility-maximising consumer has a given income and may choose between good X and good Y. The diagram presents her budget line together with several consumption combinations (F, G, H, J, K and L) for products X and Y. Which consumption combinations are available to her at this point?
Feb/March 2021
Romesh, a rational consumer, spent 90 rupees on herb X and spice Y. Each costs 10 rupees per gram. How much of each should he buy?
Feb/March 2021
XY is the budget line for an individual consumer. Which changes might keep the position of XY unchanged?
Feb/March 2022
The diagram presents an indifference map together with two budget lines. As the consumer’s budget line moves from BL1 to BL2, consumption moves from point W to point Z. What do these changes show about the type of goods X and Y?
Feb/March 2022
Explain what economists mean by indifference curves and budget lines and evaluate whether they can be used together to support rational consumer decision making.
Feb/March 2022
The diagram illustrates how a price change affects the equilibrium of a single consumer, shifting from E1 to E2. What can be deduced from the diagram about the price change, the substitution effect and the income effect?
Feb/March 2023
What is indicated by an indifference curve?
Feb/March 2024
In the diagram, a consumer’s budget line moves from GH to JK. Which statement must be true?
May/June 2010
In the diagram, a consumer’s budget line moves from GH to JK. Which statement has to be correct?
May/June 2010
In the diagram, a consumer’s budget line changes from GH to JK. Which statement has to be correct?
May/June 2010
Do you agree with these assertions?
May/June 2010
Economic theory places strong emphasis on the concept of an equilibrium position. Discuss whether equilibrium is a useful and realistic way of explaining the behaviour of a consumer.
May/June 2010
Discuss whether the notion of an equilibrium provides a useful and practical way of explaining the behaviour of a consumer.
May/June 2010
In the diagram, the consumer’s original budget line is JK. Assuming there is no change in the price of X, what might account for a shift in the consumer’s budget line to GH?
May/June 2011
A consumer aims to maximise his utility. Until what point should he go on consuming each good?
May/June 2011
In the diagram, the consumer’s original budget line is JK. If the price of X remains unchanged, what might account for the consumer’s budget line moving to GH?
May/June 2011
In the diagram, the consumer’s original budget line is JK. If the price of X stays unchanged, what might account for the consumer’s budget line moving to GH?
May/June 2011
Discuss whether demand schedules and budget line diagrams are alike in the way they show the effect of
May/June 2011
In the diagram, curve JK shows the consumer’s original budget line. Which combination might make the budget line move to GH?
May/June 2012
The curve GH shown in the diagram represents a consumer’s original budget line. Which combination could make the budget line move to JK?
May/June 2012
In the diagram, curve JK represents a consumer's original budget line. Which combination could make the budget line move to GH?
May/June 2012
A worker reacts to an increase in his hourly wage rate by cutting the number of hours he works each week. What might account for this?
May/June 2012
Discuss the extent to which the law of diminishing marginal utility may be applied to determine the market demand for a good.
May/June 2012
Explain, using a budget line diagram, whether (i) the substitution effect of a price change and (ii) the income effect would be the same for a normal good and an inferior good.
May/June 2012
In the diagram, a consumer’s budget line moves from GH to JK. Which statement must be correct?
May/June 2013
In the diagram, the consumer’s original budget line is GH. If the price of X stays unchanged, what might account for the consumer’s budget line moving to JK?
May/June 2014
On the diagram, the consumer’s original budget line is JK. If the price of X stays unchanged, what might account for the consumer’s budget line moving to GH?
May/June 2014
In the diagram, the consumer’s original budget line is GH. If the price of X remains unchanged, what might account for the consumer’s budget line moving to JK?
May/June 2014
Consumer demand can sometimes be shaped by advertising and at other times by impulse buying. Because of this, the economic theories of consumer demand grounded in utility are irrelevant to any firm that is trying to work out its probable revenue. Do you agree with this claim?
May/June 2014
‘Marginal utility as an explanation of consumer equilibrium applies only to the purchase of one good, cannot be used when incomes increase, and does not apply if advertising changes tastes. In practice, it is not a useful guide to consumer behaviour'. Assess this opinion.
May/June 2014
A consumer’s demand may sometimes be shaped by advertising and at other times by impulse buying. This suggests that the economic theories of consumer demand based on utility have no relevance to a firm that is trying to predict its likely revenue. Do you agree with this argument?
May/June 2014
In the diagram, curve JK shows the consumer’s original budget line. Which combination might make the budget line move to GH?
May/June 2015
When measuring the income effect of a change in a good’s price, what is not kept constant?
May/June 2015
In a perfect market and with a fixed income, economic analysis shows how a rational consumer chooses the quantities of products to demand. However, it cannot explain what occurs when incomes change or when businesses in imperfect markets influence prices. Discuss whether you agree with this opinion about the economic analysis of consumer behaviour.
May/June 2015
The diagram illustrates budget lines for a consumer deciding between two goods, X and Y. At first, the budget line is MM and the consumer’s chosen point is A. Later, the money prices of both goods alter, causing the budget line to shift to NN. Which point might show the consumer’s chosen position after the price change if tastes did not change?
May/June 2016
In the indifference curve diagram, point M shows the consumer’s starting equilibrium, while MN represents the substitution effect resulting from a decrease in the price of good X. If good X is a Giffen good, which point will represent the consumer’s new equilibrium after the price of good X falls?
May/June 2016
The diagram illustrates two indifference curves alongside two budget lines for goods X and Y. The starting point is P. P-R shows the substitution effect. R-S shows the income effect. What type of good is good X?
May/June 2016
With the prices of two goods given, how does economic theory interpret the meaning of consumer equilibrium?
May/June 2016
explain what economic theory means by consumer equilibrium and how this links to a consumer’s demand curve.
May/June 2016
Economists refer to indifference analysis when analysing consumer choice. Does this theory of consumer behaviour suggest that a consumer is always indifferent when deciding between two products?
May/June 2016
Which statement regarding indifference curves is correct?
May/June 2017
The diagram illustrates two indifference curves for a consumer. What can be concluded when the consumer’s equilibrium shifts from Q to R?
May/June 2017
When the price of a good decreases, the change in quantity demanded is caused by both an income effect and a substitution effect. Which of the following statements about these effects is correct?
May/June 2017
The diagram depicts two indifference curves for a consumer. What must be different between IC1 and IC2?
May/June 2017
The diagram illustrates three budget lines, QR, QT and SR. QR is the consumer’s original budget line. Which set of changes could make the budget line move to SR?
May/June 2017
Compare how a demand curve for a product is derived using the marginal utility theory with how it is derived using indifference curve theory.
May/June 2017
Choice plays a central role in economics. At times, consumers alter their decisions either when shops promote special offers on luxury goods that were previously very expensive, or when advertising leads them to revise their preferences. Analyse how indifference curve theory can be used to draw a consumer's demand curve. Discuss whether this theory can account for the changes in choice described above.
May/June 2017
Explain how utility theory may be used to show why a demand curve slopes downward.
May/June 2017
At what point does the slope of a budget line always alter?
May/June 2018
The points on the diagram show different bundles of good X and good Y. An individual likes having more of both goods rather than less, but would not want to sacrifice even one unit of X in order to get extra units of Y. How would she arrange the combinations shown in the diagram in order of preference, from highest to lowest?
May/June 2018
Which factor would not alter the budget line of an individual consumer?
May/June 2018
Which variable is not kept constant when working out the income effect of a change in the price of a good?
May/June 2018
The diagram illustrates a consumer’s starting budget line GH, along with indifference curves IC1, IC2 and IC3 for goods R and S. The consumer’s original equilibrium is at point X. Inflation is rising at a faster rate than money incomes. If the income is spent, what is the most likely new equilibrium for the consumer?
May/June 2018
With reference to Table 1.1, is smoking positively correlated with life expectancy at birth?
May/June 2018
Explain, with the help of a diagram, diminishing marginal utility and how it is connected to indifference curves.
May/June 2018
In the diagram, attainable indifference curves I1 and I2 are shown for good X and good Y. Which point shows the greatest level of satisfaction that can be reached at present?
May/June 2019
The table presents the substitution effect and the income effect for a Giffen good and an inferior good when the price of the good changes. Which combination is correct?
May/June 2019
A consumer buys two goods, X and Y. The indifference curve diagram illustrates how a change in the price of one of the goods affects the consumer’s equilibrium. Which demand curve matches the diagram?
May/June 2019
The diagram illustrates budget lines for normal goods X and Y. What might cause the budget line to move from PQ to PR?
May/June 2019
A consumer allocates all income to two goods, Y and X, and is located at E. The price of X decreases while the price of Y stays the same. The diagram uses indifference curves and budget lines to work out the price, income and substitution effects linked to this change in price. Which distance represents the income effect of this price change?
May/June 2019
The diagram presents attainable indifference curves, I1 and I2, for good X and good Y. Which point shows the greatest level of satisfaction that can be attained at present?
May/June 2019
The table indicates the substitution effect and the income effect for a Giffen good and an inferior good when the price of the good changes. Which pairing is correct?
May/June 2019
A consumer buys two goods, X and Y. The indifference curve diagram illustrates what happens to the consumer’s equilibrium when the price of one of these goods changes. Which demand curve matches the diagram?
May/June 2019
What evidence does the article provide to show that loyalty cards make markets imperfectly competitive?
May/June 2019
Analyse how an individual consumer’s demand curve for a product is derived and how this may be connected to market demand.
May/June 2019
What evidence in the article suggests that loyalty cards make markets imperfectly competitive?
May/June 2019
A consumer purchases goods X and Y. The marginal utility of good X is above zero and decreasing. The consumer has reached the point at which the ratio of the marginal utilities of the two goods is the same as the ratio of their prices. What may be concluded from this information?
May/June 2020
An indifference curve shows the possible combinations of goods X and Y when a consumer’s preferences are being examined. The diagram illustrates the consumer’s indifference curve for good X and good Y. What may be inferred from the diagram?
May/June 2020
The option instead of working is to enjoy leisure time. The diagram illustrates a worker’s choice about how many hours of labour to supply. What occurs between Y and Z?
May/June 2020
In a diagram, the gradient of a consumer’s budget line becomes steeper. What can be concluded with certainty from this?
May/June 2020
The diagram illustrates two indifference curves and two budget lines for goods X and Y. The consumer’s starting position is point F. The consumer’s desired ending position shifts to point H. What is represented by the movement from F to G?
May/June 2020
A consumer purchases goods X and Y. The marginal utility of good X is positive and decreasing. The consumer is at the point at which the ratio of the marginal utility of the two goods equals the ratio of their prices. What may be concluded from this information?
May/June 2020
To study a consumer’s preferences, an indifference curve shows the possible combinations of goods X and Y. What conclusion can be drawn from the diagram?
May/June 2020
Explain what is meant by a ‘consumer’s equilibrium position’ in indifference curve theory and how this concept can be used to construct a demand curve.
May/June 2020
Use indifference curve analysis to explain how an individual demand curve for a normal good is derived.
May/June 2020
Explain what is meant by a ‘consumer’s equilibrium position’ in indifference curve theory and how this can help in deriving a demand curve.
May/June 2020
The graph illustrates the budget line for a household in indifference curve analysis. What conclusion can be drawn about the amount of income the household could spend?
May/June 2021
The diagram illustrates a household's budget line in indifference curve analysis. (Points R, S, and T are positioned on the budget line between goods X and Y) What conclusion can be drawn about the amount of income the household may spend?
May/June 2021
Explain what the concept of the ‘equilibrium position of a consumer’ means and how the concept can be used to construct a demand curve for a good.
May/June 2021
Use indifference curve analysis to show how an individual’s demand curve for an inferior good is obtained.
May/June 2021
Explain what is meant by the concept of the ‘equilibrium position of a consumer’ and how the concept might be used to construct a demand curve for a good.
May/June 2021
The diagram illustrates five budget lines. Line 1 is the original budget line. Which pair of budget lines indicates a relatively higher price for drink than for food after a shift away from budget line 1?
May/June 2022
Broken rice is an inferior good. If its price falls, what income effect and substitution effect would result on the quantity demanded of broken rice?
May/June 2022
What does a budget line indicate?
May/June 2022
When the price of a good decreases, the total change in quantity demanded can be divided into income and substitution effects. Which statement best describes a Giffen good?
May/June 2022
The diagram shows five budget lines. Line 1 is the original budget line. After moving away from budget line 1, which pair of budget lines indicates a relatively higher price of drink than food?
May/June 2022
Broken rice is an inferior good. If its price falls, what income effect and substitution effect will result on the quantity demanded of broken rice?
May/June 2022
Discuss, with the use of indifference curve analysis, whether this statement is accurate.
May/June 2022