Naturally, when prices change utility maximizing consumption changes
as well. In the graph shown to the right, the price of dining out
fell changing the slope of the budget constraint. Our consumer
is now on the blue budget constraint. The highest indifference
curve she can now reach is the green one shown.
Notice, that she dines out more now that the price has fallen, just as the law of demand predicted. Since the price ratio changed she changes her consumption
so that her new MRS is the same as the new price ratio.
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