When the indifference curve is tangent to the budget constraint,
A) a consumer cannot be made better off without increasing her income.
B) the consumer is likely to be at a sub-optimal level of consumption.
C) income is at its optimum for a consumer.
D) indifference curves are likely to intersect.

Question

Quizplus · Accepted Answer

When the indifference curve is tangent to the budget constraint, it indicates that the consumer is maximizing their utility given their budget, meaning they cannot be made better off without increasing their income.

When the Indifference Curve Is Tangent to the Budget Constraint