Critiquing an Economic Analysis
A policy analyst is reviewing a diagram that illustrates the effect of a new economic policy on a household's consumption choices. The diagram shows that the new set of affordable consumption bundles is smaller than the original set. The diagram also includes a 'Point B', which was the household's optimal choice before the policy, and an indifference curve tangent at that point. Point B lies outside the new, smaller set of affordable bundles.
The analyst makes the following claim: "The depiction of Point B and its associated indifference curve is unnecessary. Since the household cannot afford Point B under the new policy, it is irrelevant to the analysis of the policy's effects."
Based on the principles of consumer choice modeling, evaluate the analyst's claim. Is their reasoning correct? Justify your answer.
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Sociology
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Economics
Economy
CORE Econ
Introduction to Microeconomics Course
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Critiquing an Economic Analysis