When the consumer has found the best affordable bundle of goods:
A) the area above the indifference curve that runs through the consumer's best bundle does not overlap with the area below the budget line.
B) the area above the indifference curve that runs through the consumer's best bundle does not overlap with the area above the budget line.
C) the area above the indifference curve that runs through the consumer's best bundle should overlap with the area below the budget line.
D) the area above the indifference curve that runs through any bundle other than the consumer's best bundle does not overlap with the area below the budget line.

Question

Quizplus · Accepted Answer

When the consumer has found the best affordable bundle of goods, it means that the bundle is on the highest indifference curve that is tangent to the budget line. At this point, the consumer is maximizing utility given their budget constraint. The area above this indifference curve represents a higher level of utility, but it is not affordable given the budget constraint. Therefore, it does not overlap the area below the budget line, which represents the budget constraint. So, the correct answer is A.

When the Consumer Has Found the Best Affordable Bundle of Goods