The figure given below represents two indifference curves I 1 and I 2 of an individual.Figure 7.2

-Refer to Figure 7.2. At which point in the figure above, will the consumer maximize satisfaction?
A)A
B)B
C)C
D)D

Question

The figure given below represents two indifference curves I 1 and I 2 of an individual.Figure 7.2
 
-Refer to Figure 7.2. At which point in the figure above, will the consumer maximize satisfaction?
A)A 
B)B 
C)C 
D)D

Quizplus · Accepted Answer

The consumer will maximize satisfaction at the point where the highest possible indifference curve that is still tangent to the budget line is reached, as this represents the combination of goods that gives the consumer the most utility given their budget constraint. The point where I₁ is tangent to the budget line is point C. Points A and E are not feasible given the budget constraint, while points B and D are not on the highest possible indifference curve tangent to the budget line. Therefore, the best choice is point C.

The Figure Given Below Represents Two Indifference Curves I1 and I2

The Figure Given Below Represents Two Indifference Curves I₁ and I₂