Read the following statements - Assertion (A) and Reasoning (R):
Assertion: The rational consumer's problem is to move to a point on the highest possible indifference curve given her budget set.
Reasoning: The budget set describes the bundles that are available to the consumer and her preferences over the available bundles can usually be represented by an indifference map. From the bundles which are available to her, a rational consumer always chooses the one which gives her maximum satisfaction.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 1
The budget set describes the bundles that are available to the consumer and an indifference map shows her preferences over the available bundles. A rational consumer is the one who takes such decisions which are best and give maximum satisfaction. So, from the bundles which are available, a rational consumer always chooses the one which gives her maximum satisfaction and this maximum satisfaction is provided by the highest possible indifference curve within the budget of consumer. Such indifference curve is tangent to the budget line.