The correct answer is: C. combinations of two goods at different points about which a consumer is indifferent.
An indifference curve is a graph showing combinations of two goods that provide the same level of satisfaction to a consumer. The consumer is said to be indifferent between any two points on the curve. The slope of the indifference curve indicates the marginal rate of substitution (MRS), which is the amount of one good that a consumer is willing to give up to obtain an additional unit of another good, while maintaining the same level of satisfaction.
Option A is incorrect because indifference curves do not show how much a consumer can spend on X plus Y goods. The amount that a consumer can spend on X plus Y goods is determined by the consumer’s budget constraint, which is a line that shows all the combinations of X and Y goods that the consumer can afford given their income and the prices of X and Y goods.
Option B is incorrect because indifference curves do not show higher order preference-combinations on the upper most segments. The indifference curves are all equally ranked, so there is no such thing as a higher order preference.
Option D is incorrect because indifference curves do not show that more is consumed at lower prices. The amount of a good that a consumer consumes is determined by the consumer’s budget constraint and their preferences. If the price of a good decreases, the consumer’s budget constraint will shift outward, and the consumer will be able to consume more of both goods. However, the consumer may not choose to consume more of both goods. They may choose to consume more of one good and less of the other good, or they may choose to consume the same amount of both goods.