Leah consumes at a point on her budget line where her marginal rate of substitution is less than the magnitude of the slope of her budget line.As Leah moves towards her best affordable point,she will move to
A)a lower budget line.
B)a higher budget line.
C)a lower indifference curve.
D)a higher indifference curve.
E)a tangent point on the same indifference curve.

Question

Quizplus · Accepted Answer

Leah's current consumption point is not optimal because it violates the condition of equalizing the marginal rate of substitution (MRS) and the price ratio. As she moves towards her best affordable point, she will adjust her consumption bundle such that her MRS approaches the price ratio. This adjustment will involve moving to a higher indifference curve (since the MRS is decreasing along the current indifference curve). Therefore, the correct answer is (D) a higher indifference curve.

Leah Consumes at a Point on Her Budget Line Where