The satisfaction curve (IC) and the budget constraint line (BL) are tools to show the maximization of satisfaction carried out by consumers. If BL touches the highest IC then a consumer will achieve maximum satisfaction. Consumer equilibrium will change if the income or price variables change, assuming consumer tastes are constant. If there is a change in income (increase or decrease) with the assumption that the price of goods is fixed, the IC will shift. But if the price of one of the goods changes (rises or falls) assuming a constant income level, the IC will rotate. These two events will cause a shift in consumers' balance in achieving maximum satisfaction.

Give your opinion from the statement above and draw the IC curve if there is an increase in consumer income. Have a good discussion, stay enthusiastic, wish you good health and success.

Answer rating: 100% (QA)

Consumer theory analyzes how consumers make choices to maximize their satisfaction given their budge... View the full answer