Demand expansion programs act to:Question 20Select one:a.Shift the budget line inward, shift the isoquant outward, and increase the consumption of food.b.Increase supply and decrease demand.c.Shift consumer budget lines outward, shift their indifference curve outward, and increase the consumption of food and, perhaps, all other goods.d.Shift the demand curve for food to the left.e.Shift consumer budget lines inward, shift their indifference curve inward, decrease the consumption of food, and, perhaps, all other goods.
Question
Demand expansion programs act to:Question 20Select one:a.Shift the budget line inward, shift the isoquant outward, and increase the consumption of food.b.Increase supply and decrease demand.c.Shift consumer budget lines outward, shift their indifference curve outward, and increase the consumption of food and, perhaps, all other goods.d.Shift the demand curve for food to the left.e.Shift consumer budget lines inward, shift their indifference curve inward, decrease the consumption of food, and, perhaps, all other goods.
Solution
The correct answer is c. Demand expansion programs act to shift consumer budget lines outward, shift their indifference curve outward, and increase the consumption of food and, perhaps, all other goods.
Here's why:
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Demand expansion programs are designed to increase the purchasing power of consumers. This is represented by an outward shift of the budget line, which means consumers can afford to buy more of all goods.
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As consumers can afford to buy more goods, their level of satisfaction (represented by the indifference curve) also increases. This is why the indifference curve shifts outward.
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With more purchasing power and higher level of satisfaction, consumers are likely to increase their consumption of food and possibly all other goods. This is the ultimate goal of demand expansion programs.
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