The initial budget constraint ( bc1bc1 ) shows the ngumis' budget constraint when the price of a fancy dinner is $100. at this price, kenji and lucia would choose to consume five fancy dinners. suppose that the price of a fancy dinner decreases to $50, shifting their budget constraint to bc2bc2 , which represents a new relative price of five diner breakfasts per fancy dinner. (hint: the blue line labeled h is parallel to bc2bc2 and tangent to i1i1 at point s.) in order to remain as happy as they were before the price decrease—that is, to consume at some point on the same indifference curve as they were on initially ( i1i1 )—the ngumis' income spent on fancy dinners and breakfast at diners would now only have to be. however, in reality, rather than maintaining their original level of utility, the ngumis choose the optimal bundle along their new budget constraint. at this point, they are off than before the price change in fancy dinners.
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