Budget constraint economics question
FYI – All the point are supposed to lie on the indifference curves for these questions even if they appear a touch off.
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If the consumer is initially on her budget constraint choosing bundle x and then all prices AND income double:
A. | The consumer would be better off and move to higher utility | |
B. | Whether the utility would now rise or fall depends on the initial prices and income level | |
C. | The consumer would still utility maximize with bundle x | |
D. | The consumer would now be worse off and fall to a lower utility level |
I thought it could be B, whether the utility would rise or fall depends on the initial price and income level, especially income level but then again if the curves were to remain constant shape and just doubled while considering consumers income level was able to afford point x , A, the consumer would be better off and move to higher utility could also make sense since I believe point Z is maximum utility for the consumer.
Please let me know if I am wrong and explain if possible!
Thanks!