Read the following statements -
Assertion (A) and Reasoning (R):
Assertion: The rational consumer's problem is to move to a point on the lowest possible indifference curve given her budget set.
Reasoning: Compared to a point below the budget line, there is always some point on the budget line which contains more of at least one of the goods and no less of the other, and is, therefore, preferred by a consumer whose preferences are monotonic.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 4
The rational consumer's problem is to move to a point on the HIGHEST possible indifference curve given her budget set to increase the level of satisfaction of the individual. The optimum point would be located on the budget line. The consumer is said to be in equilibrium where the IC is tangent to the budget line.