Step 1: Sort the points by affordability:
Points on or below the budget line can be bought. Points above it cannot. In the diagram, A and D sit on the budget line. B and C sit above it. So only A and D are affordable choices.
Step 2: Compare satisfaction of the affordable points:
Among the affordable points, the one on the higher indifference curve is better. A is on the curve that just touches the budget line. D is on a curve closer to the origin. So A gives more satisfaction than D.
Step 3: Name the inferior point:
An inferior point is one the consumer can afford but would drop in favour of a better affordable point. D fits this description, because the consumer would shift from D to A.
Step 4: Why A is not the answer:
A is the tangency point and is the best affordable choice. It is the consumer equilibrium, so it is not inferior.
Step 5: Why B and C are not the answer:
B and C are beyond the budget line. They are not inferior, they are simply out of reach for this income. A consumer would love to be there, but the budget does not allow it.
Final Answer:
The inferior point is D.
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