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

Manuel’s preferences, as revealed by his indifference curves, his utility-maximizing choice on the original

budget set occurs where his opportunity set is tangent to the highest possible indifference curve at W, with

three movies and 28 yogurts, while Natasha’s utility-maximizing choice on the original budget set at Y will be

seven movies and 12 yogurts.

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B • Indifference Curves 523

FIGURE B3 Manuel and Natasha’s Indifference Curves Manuel and Natasha originally face the same budget

constraints; that is, same prices and same income. However, the indifference curves that illustrate their preferences

are not the same. (a) Manuel’s original choice at W involves more yogurt and more movies, and he reacts to the

higher income by mainly increasing consumption of movies at X. (b) Conversely, Natasha’s original choice (Y)
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