Advanced Micro · intro
What moves on the Consumer Theory (Indifference Curves) diagram
Lower income shifts the budget line inward in parallel, forcing the consumer to a lower indifference curve with less of both goods.
The starting point: your best affordable bundle at current income and prices.
Recession hits and your hours get cut. Prices are unchanged, but income drops hard.
The budget line shifts in, in parallel, and the affordable set shrinks.
You slide to a lower indifference curve and cut back on both goods.
Examiners ask this as: recession, income falls, hours cut, job loss household, belt tightening.
Other scenarios on Consumer Theory (Indifference Curves)