The Point on the Budget Line That Reaches the Greatest

question 52

Multiple Choice

The point on the budget line that reaches the greatest level of utility is that point where

• A)the difference between the slope of the budget line and the slope of an indifference curve is greatest.
• B)the budget line touches the horizontal axis.
• C)the slope of the budget line equals the slope of an indifference curve.
• D)the budget line touches the vertical axis.
• E)an indifference curve is beyond the budget line.

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Definitions:

Consumption

The process by which households make use of goods and services.

Interest Rate

The portion of a loan accumulating interest for the borrower, usually articulated as an annual percentage of the unpaid loan balance.

Income

The financial compensation gained from selling goods or services, or through other means such as rental income or investments.

Utility Function

An economic concept representing a user's satisfaction levels with varying consumption of goods or services, ranked from less to more preferred.