## Indifference Curve Analysis

Follow this resource to learn more about the concept of indifference curves. Make sure to answer the "Try It" quiz questions that show you the correct answer.

### 4. The Individuality of Indifference Curves

#### 4.1. Try It

Jacob is taking a two week vacation where he will spend most of his time and budget at either amusement parks or day spas. He has set aside a budget of $1,200 dollars for his two favorite activities. During the first week he spent $200 at amusement parks and $400 at day spas for a total of $600. During the second week he spent $400 at amusement parks and $200 at day spas. If Jacob found both of his weeks equally enjoyable, was he maximizing his enjoyment subject to his budget constraint? Why or why not?

- No. Jacob would have achieved greater utility by consuming a more equal balance of amusement parks and day spas during both weeks.
- No. Utility maximization is only possible if the indifference curve does not intersect the budget constraint at any point.
- Yes. Because the indifference curve is convex it can cross budget constraint at multiple points

Muhammad is consuming the optimal quantity of movies and popcorn at Point A when the price of movies suddenly drops. Which of the following points represents a plausible new utility-maximizing equilibrium after the price drop?

- Point C
- Point D
- Point B