If an indifference curve intersects the budget constraint at two points,then ________.
A)the consumer would be equally happy at either of those two points
B)optimal consumption is found by moving to a lower indifference curve
C)optimal consumption is found by moving to a lower budget constraint
D)the consumer will choose the point that minimizes consumption expenditure

Question

Quizplus · Accepted Answer

If an indifference curve intersects the budget constraint at two points, it means that both points give the consumer the same level of utility. Therefore, the consumer would be equally happy at either of those two points. Optimal consumption would be one of the two points that intersect with the highest indifference curve. Moving to a lower indifference curve or a lower budget constraint would result in lower utility for the consumer, which is not optimal. The consumer would choose the point that maximizes utility and falls within their budget constraint.

If an Indifference Curve Intersects the Budget Constraint at Two