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When does a consumer maximize total utility from a given income?

When does a consumer maximize total utility from a given income?

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Answer #1

With a given level of income, total utility is maximized when the highest possible indifference curve is achieved by the budget constraint. this happens when the slope of budget line is equal to the slope of the indifference curve.

This also indicates that utility is maximum given the income, when the ratio of marginal utility derived from the consumption of last unit of one good to its price, is equal across all the goods consumed. This is the equimarginal principle which is stated as

MUx / Px = MUy / Py

Where the two goods are good X and good Y.

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