The consumption bundle that maximizes a consumer's satisfaction given her income is located ________.
A) at the point of tangency of the consumer's demand curve and indifference curve.
B) at any point of intersection of the consumer's demand curve and indifference curves.
C) at the point of tangency of the consumer's budget constraint and indifference curve
D) at any point of intersection of the consumer's demand curve and indifference curves

Question

Quizplus · Accepted Answer

The consumption bundle that maximizes a consumer's satisfaction given her income is located at the point where the consumer's budget constraint and indifference curve are tangent, known as the consumer's optimal consumption bundle. This is because at this point, the consumer is maximizing her utility given her income constraint. Therefore, the correct choice is C.

The Consumption Bundle That Maximizes a Consumer's Satisfaction Given Her