vertical axis, and more consumed of the good that is relatively less expensive, as shown by the “s” arrow on the

horizontal axis. See Figure B10.

FIGURE B10

Step 5. With the substitution effect in place, now choose utility-maximizing point B on the new opportunity set.

When you choose point B, think about whether you wish the substitution or the income effect to have a larger

impact on the good (in this case, candy) on the horizontal axis. If you choose point B to be directly in a vertical

line with point A (as is illustrated here), then the income effect will be exactly offsetting the substitution effect

on the horizontal axis. If you insert point B so that it lies a little to right of the original point A, then the

Access for free at openstax.org
B • Indifference Curves 531

substitution effect will exceed the income effect. If you insert point B so that it lies a little to the left of point A,
{"creationdate": "2022-12-07T14:15:44-06:00", "producer": "Prince 14.2 (www.princexml.com)", "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:37:44.339247", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "creator": "PDFMiner", "batch_upload": true, "total_pages": 597, "file_name": "Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a"}