Figure 21-15

-Refer to Figure 21-15.The price of X is $25,the price of Y is $25,and the consumer's income is $100.Which point represents the consumer's optimal choice?
A) A
B) B
C) C
D) D

Question

Figure 21-15
 
-Refer to Figure 21-15.The price of X is $25,the price of Y is $25,and the consumer's income is $100.Which point represents the consumer's optimal choice?
A) A 
B) B 
C) C 
D) D

Quizplus · Accepted Answer

The optimal choice for the consumer is where the budget constraint, represented by the line BC, is tangent to the indifference curve, represented by the curve labeled U2. This point is B, where the consumer is purchasing both goods X and Y. At point B, the consumer spends $50 on X and $50 on Y, which adds up to the total income of $100. It is the point of maximum utility (indicated by the highest indifference curve) that the consumer can afford with their income and the given prices. Points A and D are outside of the budget constraint, and point C is not the point of tangency of the budget constraint and any of the indifference curves.

Figure 21-15 -Refer to Figure 21-15.The Price of X Is $25,the Price