If a consumer chooses a combination of goods that are inside of her budget line, than
A) the consumer is maximizing her satisfaction.
B) the consumer is spending more than her current income.
C) the consumer has a constant marginal rate of substitution for the two goods.
D) the consumer is not maximizing her satisfaction.

Question

Quizplus · Accepted Answer

Choosing a combination of goods inside the budget line indicates that the consumer is not utilizing her entire budget to achieve the highest possible satisfaction. The budget line represents all combinations of goods that can be purchased with a given budget, and points on the line maximize satisfaction given the budget constraint. Points inside the budget line mean the consumer could consume more or different combinations of goods to potentially increase satisfaction, thus not maximizing it.

If a Consumer Chooses a Combination of Goods That Are