The Consumer’s Optimum The optimal consumption bundle is found where the budget constraint is just tangent to an indifference curve. At this point the slope of the indifference curve is equal to the slope of the budget constraint, MRS = . The “Better but not possible” bundle has more gasoline and more pizza than the bundle labeled “Optimal” but it is not on the budget constraint and thus not affordable.
At the “Possible but not optimal” bundle the MRS = 2 and the slope of the budget constraint, = 5. What this means is that the consumer will accept 2 gallons of gas to give up 1 pizza but the market is willing to give the consumer 5 gallons of gas if they give up 1 pizza—that is a good deal! The consumer, therefore, will trade pizza for gas until the MRS = .