1.6. The utility-maximizing bundle of goods is found at the point of tangency between the budget constraint and an indifference curve.

In the diagram below, the utility-maximizing bundle is the one labeled point K. There are two different, but equally important, ways to interpret this point.

Budget constraint Good X

a. Of the three points on the consumer's budget constraint (j, K, and L), what makes K special?

b. Of the three points on the consumer's indif ference curve (M, K, and N), what makes K special?