The maximization point is the location at which an indifference curve and the budget constraint line
A) parallel each other.
B) completely overlap.
C) are tangent to one another.
D) are secant to one another.
E) intersect a second indifference curve.

Question

Quizplus · Accepted Answer

At the point of maximization, the consumer is getting the highest possible level of satisfaction, which occurs when the budget constraint is tangent to an indifference curve. This means that the marginal rate of substitution (MRS) is equal to the price ratio (Px/Py) for the two goods being consumed. At any other point, the consumer could still increase their satisfaction by moving to a higher indifference curve that is further from the origin, but this would require consuming more of one good and less of the other, which would move them away from the budget constraint. Therefore, the maximization point occurs where the consumer is consuming the optimal combination of the two goods given their budget constraint and preferences.

The Maximization Point Is the Location at Which an Indifference