Consider the graph below. This is the diagram which showed the budget constraints and indifference curves of Matthew that we saw in Quiz 2. Quantities of Goods X and Y appear on the horizontal and vertical axes, respectively.

At the start, Matthew is in equilibrium with an income of $300, facing commodity prices $4 for Good X and $10 for Good Y. Suppose, then, that the price of Good X falls to $2.50 and the price of Good Y remains the same; nothing happens to his income.

Y 30 22.5 C E 30 35 43 75 90 120 X