Exhibit 21-6

-Refer to Exhibit 21-6.I₁,I₂ and I₃ are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should

Question

Exhibit 21-6 -Refer to Exhibit 21-6.I₁,I₂ and I₃ are indifference curves and line ab is the relevant budget constraint.If the consumer is initially at point R,he should

Quizplus · Accepted Answer

Point R is not optimal as there are higher indifference curves that can be reached within the budget constraint. Moving towards points P and N on a higher indifference curve would require the consumer to purchase more of good Y and less of good X, which is represented by moving down and to the right along the indifference curve I₂. Therefore, the consumer should choose to purchase more of Y and less of X, which is option D.

Exhibit 21-6 -Refer to Exhibit 21-6.I1,I2 and I3 Are Indifference Curves and Are

Exhibit 21-6 -Refer to Exhibit 21-6.I₁,I₂ and I₃ Are Indifference Curves and Are