Exhibit 6A-3 Consumer equilibrium

Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point W. To maximize total utility, the consumer should:
A) purchase more of good Y and less of good X.
B) remain at point W.
C) move to point X and then point Y.
D) purchase more of good X and less of good Y.

Question

Exhibit 6A-3 Consumer equilibrium
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Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point W. To maximize total utility, the consumer should:
A) purchase more of good Y and less of good X. 
B) remain at point W. 
C) move to point X and then point Y. 
D) purchase more of good X and less of good Y.

Quizplus · Accepted Answer

At point W, the consumer is not maximizing total utility because they could still move to a higher indifference curve by consuming more of good X and less of good Y. Thus, to maximize total utility, the consumer should purchase more of good X and less of good Y, which is represented by moving to point Z on the budget line. Therefore, choice D is the correct answer.

Exhibit 6A-3 Consumer Equilibrium