According to the No-Overlap Rule,
A) The area above the indifference curve that runs through the consumer's best bundle does not overlap with the area below the budget line
B) The area above the indifference curve that runs through the consumer's best bundle does not overlap with the area above the budget line
C) The area above the indifference curve that runs through the consumer's best bundle should overlap with the area below the budget line
D) The area above the indifference curve that runs through any bundle other than the consumer's best bundle does not overlap with the area below the budget line

Question

Quizplus · Accepted Answer

The No-Overlap Rule in consumer choice theory states that the area above the indifference curve passing through the optimal consumption bundle does not overlap with the area below the budget constraint. This is because the optimal bundle is on the highest attainable indifference curve given the budget constraint, meaning all other affordable combinations are on or below this curve.