Given the consumer's indifference map and the money income, the equilibrium position of the consumer will be on the indifference curve, which is ____________.

highest in the indifference map

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lowest in the indifference map

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highest but cut the price line

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highest but tangent to the price line

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Solution

The correct option is D highest but tangent to the price line
A consumer attains equilibrium at the point of tangency of price line and IC because at that point it achieves maximum utility and he can not go beyond it because income is constant.

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Similar questions

Q. A consumer is in equilibrium at the point of tangency of his indifference curve and the price line because ___________.

a) A consumer, Mr Aman is in state of equilibrium consuming two goods X and Y, with given prices Px and Py . What will happen if $\frac{M U x}{P x} > \frac{M U y}{P y}$ ?

b) Identify which of the following is not true for the Indifference Curves theory. Give valid reasons for choice of your answer:

a. Lower indifference curve represents lower level of satisfaction.
b. Two indifference curves can intersect each other.
c. Indifference curve must be convex to origin at the point of tangency with the budget line at the consumer’s equilibrium.
d. Indifference curves are drawn under the ordinal approach to consumer equilibrium.

A consumer has total money income of Rs 500 to be spent on two goods X and Y with prices of Rs 50 and Rs 10 per unit respectively. On the basis of the given information, answer the following questions:
a. Give the equation of the budget line for the consumer.
b. What is the value of slope of the budget line?
c. How many units can the consumer buy if he is to spend all his money income on good X?
d. How does the budget line change if there is a 50% fall in price of good Y?

Identify which of the following is not true for the Indifference Curves. Give valid reasons for choice of your answer:

a. Lower indifference curve represents lower level of satisfaction.

b. Two regular convex to origin indifference curves can intersect each other.

c. Indifference curve must be convex to origin at the point of tangency with the budget line at the consumer’s equilibrium.

d. Indifference curves are drawn under the ordinal approach to consumer equilibrium.

A consumer has total money income of Rs 250 to be spent on two goods X and Y with prices of Rs 25 and Rs 10 per unit respectively. On the basis of the information given, answer the following questions:

a. Give the equation of the budget line for the consumer.

b. What is the value of slope of the budget line?

c. How many units can the consumer buy if he is to spend all his money income on good X?

d. How does the budget line change if there is a fall in price of good Y?

Q. Given the budget line a consumer will try to opt for _______ level of indifference curve.

A consumer consumes only two goods. For the consumer to be in equilibrium why must Marginal Rate of Substitution between the two goods must be equal to the ratio of prices of these two goods? Is it enough to ensure equilibrium?

A consumer consumes only two goods. Why is the consumer said to be in equilibrium when he buys only that combination of the two goods which lies at that point on the Indifference curve where the budget line is tangent to the indifference curve? Explain. Use diagram.

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Given the consumer's indifference map and the money income, the equilibrium position of the consumer will be on the indifference curve, which is ____________.

The correct option is D highest but tangent to the price lineA consumer attains equilibrium at the point of tangency of price line and IC because at that point it achieves maximum utility and he can not go beyond it because income is constant.

The correct option is D highest but tangent to the price line
A consumer attains equilibrium at the point of tangency of price line and IC because at that point it achieves maximum utility and he can not go beyond it because income is constant.