Question 10
Theory of Consumer BehaviourIn the diagram above, L1L1 and L2L2 are budget lines. I1, I2 and I3 are indifference curves. Which points are optimal?
- A.U and W
- B.U and Z
- C.V and W
- D.Y and Z.
Show the answer and explanation
Answer: C (V and W)
Explanation
The best point on each budget line is where it just touches an indifference curve: V on L1L1 (touching I1) and W on L2L2 (touching I2).