Advanced Micro · intro
What moves on the Consumer Theory (Indifference Curves) diagram
Higher income shifts the budget constraint out in parallel. The consumer reaches a higher indifference curve and buys more of both (normal) goods.
You start at the best bundle you can afford: the tangency of the budget line and an indifference curve.
A pay rise lands. Prices haven't changed, only your income.
The budget line shifts out in parallel, and you climb to a higher indifference curve.
With these preferences you buy more of both goods: both are normal goods.
Examiners ask this as: pay rise, salary increase, income up, raise at work, richer.
Other scenarios on Consumer Theory (Indifference Curves)