The figure given below represents two indifference curves I₁ and I₂ of an individual. Figure 6.2 Refer to Figure 6.2.At which point in the figure above will the consumer maximize satisfaction?

Question

Quizplus · Accepted Answer

The consumer will maximize satisfaction at the point where the highest indifference curve (I₂) is tangent to the budget constraint (represented by the line B11B12). This point is labeled as C in the figure. At this point, the consumer is consuming the combination of goods that maximizes their utility given their budget constraint. Any other point on the higher indifference curve (such as point E) would require a higher budget, while any point on the lower indifference curve (such as point D) would result in lower utility.

The Figure Given Below Represents Two Indifference Curves I1 and I2

The Figure Given Below Represents Two Indifference Curves I₁ and I₂