Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Question

Quizplus · Accepted Answer

At the point of tangency between the budget line and an indifference curve, the slope of the budget line (representing the price ratio of two goods) equals the slope of the indifference curve (representing the marginal rate of substitution between the two goods), indicating that the consumer has reached the highest possible utility given their budget constraint.

Graphically, the Consumer Maximizes Total Utility Where the Budget Line