The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3 In Figure 6.3, the consumer is in equilibrium at point:

Question

The below figure shows the various combinations of the goods X and Y that yield different levels of utility. Figure 6.3  In Figure 6.3, the consumer is in equilibrium at point:

Quizplus · Accepted Answer

The consumer is in equilibrium at the point where the budget line is tangent (just touches) to the highest possible indifference curve. This point is point B as it is the intersection of the budget line and the indifference curve at a higher level of utility than points A and C, and it is the highest possible point of the budget line. Point D and E are not feasible choices as they lie outside the budget constraint.

The Below Figure Shows the Various Combinations of the Goods