In the diagram, YL and YM represent two budget lines for a consumer of product X when its price varies. IC1 and IC2 are two indifference curves, showing the consumer’s preferences between product X and expenditure on other goods. Which statement is not valid?
- AProduct X must be a Giffen good, since the consumer spends more on other goods after the price change.
- BThe consumer has greater satisfaction at E2 than at E1.
- CThe prices of other goods are assumed to be held constant when drawing the budget lines.
- DThe shift from YL to YM represents a fall in the price of product X.