Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y.
-Refer to Figure 21-25. Suppose the price of good X is $10, the price of good Y is $5, and the consumer's income is $210. Then the consumer's optimal choice is represented by a point on which curve?

Question

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y.

-Refer to Figure 21-25. Suppose the price of good X is $10, the price of good Y is $5, and the consumer's income is $210. Then the consumer's optimal choice is represented by a point on which curve?

Quizplus · Accepted Answer

The consumer's budget line with these prices and income is given by the line that intersects the point where the X-axis intercept is 21 and Y-axis intercept is 42. The highest indifference curve that touches this budget line is I₂, which represents the consumer's optimal choice. This point is where the budget line is tangent to the indifference curve, meaning it gives the consumer the highest level of utility they can afford with their budget.

Figure 21-25 the Figure Pertains to a Particular Consumer