The consumer's optimal consumption bundle is at the point where:
A)the slope of the indifference curve equals the slope of the budget line.
B)the indifference curve intersects the budget line.
C)the ratio of the total utilities of the goods equals the ratio of the prices of the goods.
D)the marginal utility of each good is maximized.

Question

Quizplus · Accepted Answer

The consumer's optimal consumption bundle occurs where the slope of the indifference curve (representing the rate at which the consumer is willing to substitute one good for another while maintaining the same level of utility) equals the slope of the budget line (representing the rate at which the market allows the consumer to substitute one good for another based on their prices). This condition ensures that the consumer is maximizing utility given their budget constraints.

The Consumer's Optimal Consumption Bundle Is at the Point Where