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UI Post-UTME Economics 2014 (Model questions) Question 17

Question 17

Theory of Consumer Behaviour

Use the diagram (indifference curves and a budget line, points N, K, P and M) to answer this question. The consumer is at equilibrium, at point

Diagram for this question
  1. A.N
  2. B.P
  3. C.M
  4. D.K
Show the answer and explanation

Answer: D (K)

Explanation

Equilibrium is where the budget line just touches (is tangent to) the highest indifference curve it can reach, which is at K.