In an indifference curve/budget line diagram, at your consumer equilibrium, that is, your best affordable point, which of the following statements is correct?
A) Any movement upward or downward on your budget line will move you to a less preferred point.
B) Any movement upward or downward on your indifference curve will move you to a less preferred point.
C) Your marginal rate of substitution is greater than the magnitude of the budget line by as much as possible.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

At consumer equilibrium, the best affordable point is where the budget line is tangent to the highest possible indifference curve. Any movement along the budget line from this point will lead to a less preferred point because it will be on a lower indifference curve.

In an Indifference Curve/budget Line Diagram, at Your Consumer Equilibrium