Question

A consumer consumes only two goods. If price of one of the goods falls, the indifference curve ______.

(Choose the correct alternative)

Options

• Shifts upwards

• Shifts downwards

• Can shift both upwards or downwards

• Does not shift

Answer 1

A consumer consumes only two goods. If price of one of the goods falls, the indifference curve does not shift.

Explanation:

An indifference curve reflects preferences, not prices or income. A price change affects the budget line, but does not shift the indifference curve.