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    Question

    A consumer's optimal bundle is located at the point of

    tangency between the budget line and ________.
    A indifference curve Correct Answer Incorrect Answer
    B law of demand Correct Answer Incorrect Answer
    C income effect Correct Answer Incorrect Answer
    D monotonicity Correct Answer Incorrect Answer

    Solution

    The optimum bundle of the consumer is located at the point where the budget line is tangent to one of the indifference curves. The indifference curve is a geometrical device developed by J.R. Hicks and R.G.D. Allen in the article “A Reconsideration of the Theory of Value”.

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