Exhibit 6A-3 Consumer equilibrium

-Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point W. To maximize total utility, the consumer should:
A) purchase more of good Y and less of good X.
B) remain at point W.
C) move to point X and then point Y.
D) purchase more of good X and less of good Y.

Question

Exhibit 6A-3 Consumer equilibrium
​ 
-Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point W. To maximize total utility, the consumer should:
A) purchase more of good Y and less of good X. 
B) remain at point W. 
C) move to point X and then point Y. 
D) purchase more of good X and less of good Y.

Quizplus · Accepted Answer

The consumer is currently at point W, where the budget line is tangent to the indifference curve. This means that the consumer is spending all of their budget on goods X and Y in such a way that they are equally happy with the bundle. To maximize total utility, the consumer should move to a higher indifference curve, which can be achieved by purchasing less of good Y and more of good X. Moving to point X or point Y directly would not maximize total utility. Therefore, option D is the best choice.

Exhibit 6A-3 Consumer Equilibrium