Indifference curves and budget lines
7.2What the syllabus asks of you
- meaning of an indifference curve and a budget line
- causes of a shift in the budget line
- income, substitution and price effects for normal, inferior and Giffen goods
- limitations of the model of indifference curves
Drill this topic
Every question on Indifference curves and budget lines, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
45 questions
1May / June 2026 · Paper 31 · Q4Show mark scheme →
Aincome effect: fall in quantity from U to T; substitution effect: rise in quantity from S to U
Bincome effect: rise in quantity from S to T; substitution effect: rise in quantity from T to U
Cincome effect: rise in quantity from S to U; substitution effect: fall in quantity from U to T
Dincome effect: rise in quantity from T to U; substitution effect: rise in quantity from S to U
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2May / June 2026 · Paper 32 · Q7Show mark scheme →
Athe price of wheat has decreased; the substitution effect is shown by the shift from S to U
Bthe price of wheat has increased; wheat is a normal good
Cwheat is a Giffen good; the income effect is shown by the shift from S to W
Dwheat is a Giffen good; the substitution effect outweighs the income effect
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3May / June 2026 · Paper 33 · Q4Show mark scheme →
Aincome effect: fall in quantity from U to T; substitution effect: rise in quantity from S to U
Bincome effect: rise in quantity from S to T; substitution effect: rise in quantity from T to U
Cincome effect: rise in quantity from S to U; substitution effect: fall in quantity from U to T
Dincome effect: rise in quantity from T to U; substitution effect: rise in quantity from S to U
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4May / June 2026 · Paper 34 · Q2Show mark scheme →
APoint E is the most desirable combination.
BPoint F is less desirable than point G.
CPoint G is the least desirable combination.
DPoints E, F and G are equally desirable combinations.
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5Oct / Nov 2025 · Paper 34 · Q2Show mark scheme →
AConsumers get more satisfaction on curve I1 from consuming more of X and less of Y.
BConsumers get more satisfaction on curve I2 from consuming less of X and more of Y.
CEach point on the curve represents the marginal rate of substitution of good X for good Y.
DMovement from I1 to I2 cannot be made unless the indifference curves cross.
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6May / June 2025 · Paper 31 · Q3Show mark scheme →
Athe individual's preference for various goods
Bthe level of income tax
Cthe money prices of goods
Dthe incomes earned by the individual
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7May / June 2025 · Paper 32 · Q1Show mark scheme →
Aa decrease in the consumer's real income
Ba decrease in the quality of both goods
Can increase in the consumer's money income
Dan increase in the price of both goods
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8May / June 2025 · Paper 33 · Q3Show mark scheme →
Athe individual's preference for various goods
Bthe level of income tax
Cthe money prices of goods
Dthe incomes earned by the individual
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9Feb / March 2025 · Paper 32 · Q5Show mark scheme →
ANegative income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
BNegative income effect and substitution effect move in the same direction, leading to a flatter demand curve.
CPositive income effect and substitution effect move in opposite directions, leading to a steeper demand curve.
DPositive income effect and substitution effect move in the same direction, leading to a flatter demand curve.
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10Oct / Nov 2024 · Paper 31 · Q2Show mark scheme →
AIt will remain concave to the origin of the diagram.
BIt will remain convex to the origin of the diagram.
CIt can intersect other indifference curves at any point.
DThe lower the indifference curve, the greater the satisfaction attainable.
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11Oct / Nov 2024 · Paper 32 · Q2Show mark scheme →
AThe consumer can express preferences between all possible combinations of goods.
BThe consumer has a limited income to spend.
CThe consumer will always behave rationally.
DThe consumer will always get positive utility from having more of the goods.
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12Oct / Nov 2024 · Paper 33 · Q2Show mark scheme →
AIndifference curves are usually convex to the origin of the diagram.
BIndifference curves can intersect each other.
CThe consumer always prefers a higher indifference curve to a lower one.
DThe slope of the indifference curve represents the marginal rate of substitution.
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13May / June 2024 · Paper 31 · Q2Show mark scheme →
A100 units of X, 0 units of Y
B70 units of X, 15 units of Y
C50 units of X, 25 units of Y
D20 units of X, 40 units of Y
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14May / June 2024 · Paper 32 · Q2Show mark scheme →
Aproduct X 5, product Y 10
Bproduct X 5, product Y 20
Cproduct X 10, product Y 10
Dproduct X 20, product Y 10
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15May / June 2024 · Paper 33 · Q2Show mark scheme →
A100 units of X, 0 units of Y
B70 units of X, 15 units of Y
C50 units of X, 25 units of Y
D20 units of X, 40 units of Y
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16Feb / March 2024 · Paper 32 · Q2Show mark scheme →
Athe amount of two products achievable with given income and prices
Bthe different combinations of two goods that give a consumer equal utility
Cthe income available to buy the two goods
Dthe rate at which marginal utility changes as consumption changes
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17Oct / Nov 2023 · Paper 31 · Q2Show mark scheme →
Ab–b1
Bb–b2
Cb–b3
Db–b4
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18Oct / Nov 2023 · Paper 32 · Q2Show mark scheme →
AThe range of indifference curves shows the combination of products a consumer can purchase with a given income.
BIf an indifference curve is a downward-sloping straight line, the principle of diminishing marginal utility must be operating.
CIndifference curves never cross, because this means that a consumer would be indifferent between combinations of two goods, even when one combination provides more of each good.
DThe gap between indifference curves is always constant.
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19Oct / Nov 2023 · Paper 33 · Q2Show mark scheme →
Aallocative efficiency
Bdiminishing marginal rate of substitution
CPareto optimality
Dthe equi-marginal principle
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20May / June 2023 · Paper 31 · Q3Show mark scheme →
AThe consumer's income may change.
BThe consumer may change their satisfaction-maximising objective.
CThe consumers may change their tastes and preferences.
DThe relative prices of products may change.
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21May / June 2023 · Paper 32 · Q2Show mark scheme →
AThe individual can afford more apples than pears.
BThe individual has not changed their total utility.
CThe individual prefers apples to pears.
DThe individual has gained more utility by moving from point X to point Y.
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22May / June 2023 · Paper 33 · Q3Show mark scheme →
AThe consumer's income may change.
BThe consumer may change their satisfaction-maximising objective.
CThe consumers may change their tastes and preferences.
DThe relative prices of products may change.
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23Feb / March 2023 · Paper 32 · Q3Show mark scheme →
Aprice of X falls; substitution effect positive; income effect positive
Bprice of X falls; substitution effect positive; income effect negative
Cprice of Y rises; substitution effect negative; income effect positive
Dprice of Y rises; substitution effect negative; income effect negative
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24Oct / Nov 2022 · Paper 31 · Q5Show mark scheme →
AA budget line shows the combinations of two goods which can be bought with a given income.
BA budget line shows the combinations of two goods which a consumer wants to buy.
CA budget line shows the difference between income and expenditure.
DA budget line shows the maximum potential output of two goods with given resources.
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25Oct / Nov 2022 · Paper 31 · Q6Show mark scheme →
AProduct X must be a Giffen good, since the consumer spends more on other goods after the price change.
BThe consumer has greater satisfaction at E2 than at E1.
CThe prices of other goods are assumed to be held constant when drawing the budget lines.
DThe shift from YL to YM represents a fall in the price of product X.
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26Oct / Nov 2022 · Paper 32 · Q5Show mark scheme →
AIt illustrates consumer preference between two goods.
BIt illustrates combinations of two goods that consumers are able to purchase with a given income.
CIt illustrates the least cost combination of goods that yield the same level of utility.
DIt illustrates the income effect of a price change.
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27Oct / Nov 2022 · Paper 32 · Q6Show mark scheme →
AThe income and substitution effects of the price increase will work in opposite directions in the case of a Giffen good.
BThe income effect of the price increase will result in reduced consumption for all goods.
CThe new equilibrium position will be where the new budget line meets the original indifference curve.
DThe price rise will be represented by a parallel shift inwards of the original budget line.
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28Oct / Nov 2022 · Paper 33 · Q6Show mark scheme →
ALK
BSR
CTS
DTR
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29May / June 2022 · Paper 31 · Q5Show mark scheme →
A2 and 3
B2 and 4
C3 and 5
D4 and 5
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30May / June 2022 · Paper 31 · Q6Show mark scheme →
Afalls; falls
Bfalls; rises
Crises; falls
Drises; rises
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31May / June 2022 · Paper 32 · Q5Show mark scheme →
Athe behaviour of a utility-maximising consumer
Bthe difference between an individual's consumption and saving
Cthe monetary value of the disposable income of a consumer
Dthe maximum combinations of two products that a consumer can buy with a given level of income
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32May / June 2022 · Paper 32 · Q6Show mark scheme →
AThe income effect is irrelevant for a Giffen good.
BThe income effect works in the same direction as the substitution effect.
CThe income effect works against the substitution effect and is of a greater magnitude.
DThe income effect works against the substitution effect but is of a smaller magnitude.
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33May / June 2022 · Paper 33 · Q5Show mark scheme →
A2 and 3
B2 and 4
C3 and 5
D4 and 5
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34May / June 2022 · Paper 33 · Q6Show mark scheme →
Aincome effect: falls; substitution effect: falls
Bincome effect: falls; substitution effect: rises
Cincome effect: rises; substitution effect: falls
Dincome effect: rises; substitution effect: rises
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35Feb / March 2022 · Paper 32 · Q5Show mark scheme →
Aconsumer's income: decrease; price of good M: decrease; price of good N: increase
Bconsumer's income: decrease; price of good M: increase; price of good N: increase
Cconsumer's income: increase; price of good M: increase; price of good N: decrease
Dconsumer's income: increase; price of good M: increase; price of good N: increase
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36Feb / March 2022 · Paper 32 · Q6Show mark scheme →
Agood X normal, good Y inferior
Bgood X normal, good Y normal
Cgood X inferior, good Y normal
Dgood X inferior, good Y inferior
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37Oct / Nov 2021 · Paper 31 · Q5Show mark scheme →
Athe amount that a household has available to spend plotted against time
Bthe combinations of two goods that can be purchased when all income is spent
Cthe difference between a government's income and expenditure plotted against time
Dthe relationship between the price of a good and the amount demanded
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38Oct / Nov 2021 · Paper 32 · Q4Show mark scheme →
A9 units of good X, 11 units of good Y
B10 units of good X, 11 units of good Y
C11 units of good X, 10 units of good Y
D12 units of good X, 12 units of good Y
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39Oct / Nov 2021 · Paper 32 · Q5Show mark scheme →
AIt is a Giffen good.
BIt is an inferior good.
CIt is a normal good.
DIt is a public good.
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40Oct / Nov 2021 · Paper 33 · Q6Show mark scheme →
ADiagram A: BL1 and BL2 with same vertical intercept on good Y axis, BL2 further out on good X axis
BDiagram B: BL1 and BL2 with same vertical intercept on good Y axis, BL2 further out on good X axis with steeper slope
CDiagram C: BL1 and BL2 with same horizontal intercept on good X axis, BL2 further out on good Y axis
DDiagram D: BL1 and BL2 parallel, BL1 further out on both axes
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41Oct / Nov 2021 · Paper 33 · Q7Show mark scheme →
Anature of good X: inferior; relationship between good X and good Y: complements
Bnature of good X: inferior; relationship between good X and good Y: substitutes
Cnature of good X: normal; relationship between good X and good Y: complements
Dnature of good X: normal; relationship between good X and good Y: substitutes
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42May / June 2021 · Paper 31 · Q4Show mark scheme →
AIt is greater at point R than point S.
BIt is greater at point T than point S.
CIt is greatest at point S.
DIt is the same at points R, S and T.
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43May / June 2021 · Paper 32 · Q5Show mark scheme →
ABoth the substitution effect and the income effect cause the consumer to buy less of the good.
BBoth the substitution effect and the income effect cause the consumer to buy more of the good.
CThe substitution effect causes the consumer to buy less of the good and the income effect causes the consumer to buy more of the good.
DThe substitution effect causes the consumer to buy more of the good and the income effect causes the consumer to buy less of the good.
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44May / June 2021 · Paper 33 · Q4Show mark scheme →
AIt is greater at point R than point S.
BIt is greater at point T than point S.
CIt is greatest at point S.
DIt is the same at points R, S and T.
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45Feb / March 2021 · Paper 32 · Q4Show mark scheme →
AF, G, H and L
BF, G, J, and L
CG, J and L only
DG, H, J and L
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