Figure 4.11 (reproduced as E4.1) - Zoë's Optimal Altruistic Choice

A consumer has a fixed weekly income to spend on two goods: digital books and movie streaming subscriptions. The consumer has identified their optimal consumption bundle, which provides the highest level of satisfaction possible given their income. They then imagine a different, more desirable combination of goods. This new combination lies on an indifference curve where every point represents a higher level of satisfaction than their current optimal bundle. However, they realize they cannot afford any of the combinations on this new, higher indifference curve. What is the fundamental economic reason for this situation?

Evaluating Consumer Choices

Interpreting Consumer Possibilities

Consider a consumer's choices between two goods. If a specific bundle of goods, Bundle X, is located on an indifference curve where every single combination is beyond the consumer's budget, then it is impossible for the consumer to afford any other bundle that they would strictly prefer to Bundle X.

Imagine a standard consumer choice diagram for two goods, where a downward-sloping line represents the limit of affordable consumption bundles. A set of indifference curves (IC₁, IC₂, IC₃, and IC₄) are plotted on this diagram, each representing a different level of satisfaction. Their positions relative to the limit are as follows:

• IC₁ is located entirely within the affordable area, not touching the limit line.
• IC₂ intersects the limit line at two distinct points.
• IC₃ touches the limit line at exactly one point.
• IC₄ is located entirely outside the affordable area, not touching the limit line at any point.

Based on this information, which indifference curve represents a level of satisfaction that is completely impossible for the consumer to achieve?

Analyzing Consumer Constraints

Relevance of Unattainable Consumption

A consumer makes choices between two goods, subject to a budget constraint represented by a line on a graph. The consumer's preferences are shown by a series of indifference curves. Match the description of each indifference curve's position relative to the budget constraint line with the correct economic classification of the consumption bundles on that curve.

Overcoming Consumer Constraints

A consumer has a desired consumption bundle of goods that would provide a very high level of satisfaction. However, this specific bundle is currently unaffordable given their income and the prices of the goods. Further analysis reveals that no possible adjustment to the consumer's spending can achieve this specific level of satisfaction. What can be concluded about every other combination of goods that would provide this same high level of satisfaction?