A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is greater than
the slope of the budget constraint. We can conclude that the consumer
a. is currently maximizing satisfaction subject to the budget constraint.
b. could increase satisfaction by consuming more X and less Y.
c. could increase satisfaction by consuming less X and more Y.
d. could purchase more X and more Y and increase total satisfaction.
b
You might also like to view...
One reason that lawyers might prefer a contingent contract when representing a plaintiff in a tort case is that
A) lawyers are risk neutral. B) diversification of many cases allows lawyers to reduce risk. C) lawyers are typically confident about winning every case. D) hourly rates for lawyers are usually very low.
If a series of major technological breakthroughs occur in the economy at the same time, then the most likely outcome would be that the economy's
a. investment curve will shift downward b. investment curve will shift upward c. consumption curve will shift downward d. consumption curve will shift upward e. position along the existing investment curve will move upward