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UI Post-UTME Economics 2014 (Model questions) Question 18

Question 18

Theory of Consumer Behaviour

Use the diagram (indifference curves and a budget line, points N, K, P and M) to answer this question. To move from point M to K, the consumer has to increase the

Diagram for this question
  1. A.consumption of X and reduce the consumption of Y
  2. B.expenditure on Y
  3. C.expenditure on X
  4. D.consumption of V and reduce the consumption of X.
Show the answer and explanation

Answer: D (consumption of V and reduce the consumption of X.)

Explanation

K lies higher up the budget line than M, so moving there means buying more Y and less X.