Asked by Zuleika Torres on Jul 08, 2024
Verified
Graphically,the consumer maximizes total utility where the budget line is tangent to an indifference curve.
Total Utility
The overall satisfaction or benefit a consumer receives from consuming a certain quantity of a good or service.
Indifference Curve
A graph that represents different combinations of two goods or services among which a consumer is indifferent, meaning they have no preference for one combination over another, all providing the same level of utility.
Budget Line
A graphic representation of all possible combinations of two goods that can be purchased at given prices and a given income.
- Identify the conditions for consumer's maximization of total utility using graphical analysis.
Verified Answer
AZ
Angelica ZhengJul 09, 2024
Final Answer :
True
Explanation :
This is a basic principle in consumer theory. The point where the budget line (representing a consumer's budget constraint) is tangent to an indifference curve (representing a consumer's preferences) is where the consumer maximizes total utility, given the budget constraint.
Learning Objectives
- Identify the conditions for consumer's maximization of total utility using graphical analysis.