Question

consumption choices and behavioral economics
wednesday by 11:59pm points 100 submitting an external tool
a change in income affects consumption choices
a budget constraint curve for fast food and everything else is shown above in the figure, with the original utility - maximizing choice at point m. suppose your income increases, but fast food is then considered an inferior good. which point(s) could potentially be the new utility - maximizing choice?

Explanation:

Step1: Recall inferior - good concept

When income increases and a good is inferior, the quantity demanded of the inferior good decreases.

Step2: Analyze the graph

Fast - food is an inferior good. With an increase in income, the consumption of fast - food should decrease and the consumption of everything else should increase. Point A represents a decrease in fast - food consumption and an increase in the consumption of everything else compared to point M.

Answer:

Point A