The indifference curve/budget line diagram concludes that Jim is definitely in equilibrium when he is
A) spending all his budget.
B) saving some of his budget.
C) consuming the combination of goods and services that is affordable and on the highest attainable indifference curve.
D) consuming a combination of goods and services that is on an indifference curve.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

According to the indifference curve/budget line diagram, Jim is in equilibrium when he is consuming a combination of goods and services that is both affordable (falls within the budget line) and on the highest attainable indifference curve (maximizes his satisfaction/welfare). This point of equilibrium is the optimal level of consumption for Jim given his budget and preferences. Therefore, options A, B, D, and E are not correct.

The Indifference Curve/budget Line Diagram Concludes That Jim Is Definitely