Question

Explain why individuals make choices that are directly on the budget constraint, rather than inside the budget constraint or outside it.

Answer 1

They make choices that are directly on the budget constraint because it is an efficient point. It is the best that I can buy with my money. They don't make choices inside the budget constraint because it is not efficient since I can get a better result with my money. They don't make choices outside the budget  constraint because it is not possible since I don't have enough money to go outside my budget.

Answer 2

Individuals that make choices inside the budget constraint, allow them to save, but spending directly from the budget is what people do. Basically they will get the most use out of their income. If they maximize money, will maximy utility too.