In a budget line/indifference curve diagram,at the consumer's equilibrium at the best affordable point,
A) any movement upward or downward on the budget line will move the consumer to a less preferred point.
B) any movement to the northeast to higher indifference curves moves the consumer to a less preferred point.
C) the slope of the budget line exceeds the marginal rate of substitution by as much as possible.
D) the budget line has a positive slope and the indifference curve has a negative slope.
E) the budget line has a negative slope and the indifference curve has a positive slope.

Question

Quizplus · Accepted Answer

At the consumer's equilibrium at the best affordable point, the consumer is already at the highest possible indifference curve that they can afford. Any movement upward or downward on the budget line will mean that the consumer can either afford more or less of at least one good, which will result in a less preferred point. Therefore, option A is the correct answer. Option B is incorrect because moving to higher indifference curves would mean consuming more of both goods and would be a preferred outcome. Option C is incorrect because the marginal rate of substitution is equal to the slope of the indifference curve, not the budget line. Likewise, option D is incorrect because both the budget line and the indifference curve typically have a negative slope. Option E is also incorrect because the budget line has a positive slope and the indifference curve has a negative slope.

In a Budget Line/indifference Curve Diagram,at the Consumer's Equilibrium at the Best