At the consumer’s optimum, the budget line just touches an indifference curve. Bundles on indifference curves lying above this curve are:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → not affordable for the consumer
The indifference curve that just touches the budget line is the highest one she can reach. Bundles on curves above it lie beyond the budget line, so they cost more than her income.
Such bundles would give her more satisfaction, but she cannot afford them. Curves below the optimum hold the inferior bundles.
NCERT (2026-27): “2.3 Optimal Choice of the Consumer Figure 2.12 illustrates the consumer’s optimum. … The first thing to note is that the indifference curve just touching the budget line is the highest possible indifference curve given the consumer’s budget set. Bundles on the indifference curves above this, like the grey one, are not affordable. Points on the indifference curves below this, like the blue one, are certainly inferior to the points on the indifference curve, just touching the budget line. …” |