Remember, indifference curves show consumption bundles which yield equal satisfaction or utility to the consumer. Part of the consumption reduction, from M_O to M_N, is due to the income effect. The increase in price means that her income doesn't buy as much as it did before; therefore, it is as if her income has been reduced.

Part of this change is due to the substitution effect. Because movies are now relatively more expensive than other things, she substitutes other activities for some movies.

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