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

involves relatively more movies, but she reacts to the higher income by choosing relatively more yogurts. Even when

budget constraints are the same, personal preferences lead to different original choices and to different reactions in

response to a change in income.

Now, say that income rises to $60 for both Manuel and Natasha, so their budget constraints shift to the right. As

shown in Figure B3 (a), Manuel’s new utility maximizing choice at X will be seven movies and 32 yogurts—that

is, Manuel will choose to spend most of the extra income on movies. Natasha’s new utility maximizing choice at

Z will be eight movies and 28 yogurts—that is, she will choose to spend most of the extra income on yogurt. In

this way, the indifference curve approach allows for a range of possible responses. However, if both goods are
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