in income will cause the budget constraint to shift to the left, which will cause it to be tangent to a lower

indifference curve, representing a reduced level of utility. If income rises by, for example, 50%, exactly how

much will a person alter consumption of books and doughnuts? Will consumption of both goods rise by 50%,

or will the quantity of one good rise substantially, while the quantity of the other good rises only a little, or even

declines?

Since personal preferences and the shape of indifference curves are different for each individual, the response

to changes in income will be different, too. For example, consider the preferences of Manuel and Natasha in
Figure B3 (a) and Figure B3 (b). They each start with an identical income of $40, which they spend on yogurts

that cost $1 and rental movies that cost $4. Thus, they face identical budget constraints. However, based on
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