Exhibit 6A-4 Consumer equilibrium

-Given the budget line and indifference curves shown in Exhibit 6A-4, assume the consumer is initially at point C. To maximize total utility, the consumer should:
A) purchase more of good X and less of good Y.
B) remain at point C.
C) move to point B and then point A.
D) purchase more of good Y and less of good X.

Question

Exhibit 6A-4 Consumer equilibrium
​ 
-Given the budget line and indifference curves shown in Exhibit 6A-4, assume the consumer is initially at point C. To maximize total utility, the consumer should:
A) purchase more of good X and less of good Y. 
B) remain at point C. 
C) move to point B and then point A. 
D) purchase more of good Y and less of good X.

Quizplus · Accepted Answer

The consumer should move from point C to point A or a point on the same indifference curve that is above and to the left of point C. This is because at point A, the consumer can achieve a higher level of total utility given the budget constraint. Moving to point B would result in a lower level of total utility as the consumer would have to sacrifice too much of good X to afford any more of good Y. Therefore, the consumer should purchase more of good Y and less of good X to reach a point on the higher indifference curve that is still on the budget line.

Exhibit 6A-4 Consumer Equilibrium