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Figure 4.20 A Corner Solution
A corner solution occurs when the consumer spends all his money on one good. Given Greg’s income and the relative prices of mystery novels and Bluetooth speakers, Greg is going to consume two speakers and zero mystery novels at his optimal consumption bundle (A). All other feasible consumption bundles, such as point B, correspond to indifference curves with lower utility levels than the indifference curve U2 at point A. Greg cannot afford consumption bundles at a higher utility level, such as U3, with his current income.