Question

Illustrate how changes in prices and income impact an individual’s opportunities.

Short answer

Changes in income and prices create a direct impact on an individual's opportunities.

Step-by-step solution

Introduction

Consumer preference signifies consumers' behavior while selecting goods. Changes in income and prices led to changes in the choice set of the consumers.

It is witnessed that price reduction will increase the customers' real income. Hence, allowing the consumer to consume more goods.

Describe about the changes in prices and income’s impact

An upsurge in income will locomote the budget line outwards and leads to an increase in consumption. Also, the consumer's utility level is increased, and it helps the consumer to move to a higher indifference curve.

On the other hand, if price gains and income face reductions, then the choice set open to the consumer drops, which moves the consumer to a more downward indifference curve and decreases the level of utility.