The consumer's optimal purchase of any two goods is the point where ?
Correct answer: C. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
- A. the budget constraint crosses the indifference curve
- B. the two highest indifference curves cross
- C. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
- D. the consumer has reached the highest indifference curve
Explanation
The consumer chooses the highest indifference curve that can still be reached with the available income. At an interior optimum, this curve is tangent to the budget constraint.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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