A consumer maximizes total utility when she or he purchases the combination of the two products at which her or his budget line is tangent to an indifference curve.

Question

Quizplus · Accepted Answer

This condition represents the point where the consumer achieves the highest level of satisfaction possible within their budget constraints, as the marginal rate of substitution between the two goods (indicated by the slope of the indifference curve) equals the ratio of their prices (indicated by the slope of the budget line).

A Consumer Maximizes Total Utility When She or He Purchases