Economic Idea - Corner Solution and Interior Solution

By Kibash
Corner Solution
Corner Solution is a choice made by an agent that is at a constraint or corner, and not at the tangency of two classical curves on a graph,
one characterizing what the agent could obtain and the other characterizing the imaginable choices that would attain the highest reachable value of the agents' objective. It could be simply put as maximized situation whereby consumer is unwilling to purchase one of the commodities available. It is an instance where the 'best' solution (i.e. maximizing profit, or utility, or whatever value is sought) is not achieved based on the market-efficient maximization of related quantities, but rather based on brute-force boundary conditions.
A classic example of a corner solution is the intersection between a consumer's budget line (characterizing the maximum amounts of good X and good Y that the consumer can afford) and the highest feasible indifference curve.
If the agent's best available choice is at a constraint -- e.g. among affordable bundles of good X and good Y the agent prefers quantity zero of good X -- that choice is often not at a tangency of the indifference curve and the budget line, but at a "corner".
Another example is "zero-tolerance" policies, or parents who are unwilling to expose their children to any risk, no matter how small and no matter what the benefits of the activity might be. "Nothing is more important than my child's safety" is a corner solution in its refusal to admit there might be tradeoffs.

Interior Solution

An Interior Solution is a choice made by an agent that can be characterized as an optimum located at a tangency of two curves on a graph.
A classic example of an interior solution is the tangency between a consumer's budget line (characterizing the maximum amounts of good X and good Y that the consumer can afford) and the highest possible indifference curve. The slope of that tangency is where:
(marginal utility of X)/(price of X) = (marginal utility of Y)/(price of Y)
Unlike the Corner Solution, for Interior Solution equilibrium is attained when two commodities are obtained.