Refer to the following graphs of a consumer's indifference map and budget lines and possible demand curves:

The price of Y is $50.
-If the price of X is $10, what combination of X and Y will a utility-maximizing consumer choose?
A) 400X, 100Y
B) 800X, 130Y
C) 850X, 130Y
D) 1,000X, 100Y
E) none of the above

Question

Refer to the following graphs of a consumer's indifference map and budget lines and possible demand curves:

The price of Y is $50.
-If the price of X is $10, what combination of X and Y will a utility-maximizing consumer choose?
A) 400X, 100Y 
B) 800X, 130Y 
C) 850X, 130Y 
D) 1,000X, 100Y 
E) none of the above

Quizplus · Accepted Answer

The consumer will choose the combination of X and Y at the point where the budget line is tangent to the highest possible indifference curve. This point is at the intersection of the budget line with the third indifference curve from the top. From the graph, this occurs at a quantity of 850X and 130Y.

Refer to the Following Graphs of a Consumer's Indifference Map