A consumer's ______ determines the location of their uncompensated demand curve,while the level of their ______ determines the location of their compensated demand curve.
A) Income; well-being
B) Well-being; income
C) Indifference curves; income
D) Preferences; well-being

Question

Quizplus · Accepted Answer

An individual's income determines the maximum amount they are willing and able to pay for a good or service i.e. their uncompensated demand curve. On the other hand, the level of their well-being or utility determines the minimum amount of compensation they require to remain on the same indifference curve i.e. their compensated demand curve. Therefore, A is the correct answer.

A Consumer's ______ Determines the Location of Their Uncompensated Demand