When the budget line is just tangent to the highest achievable indifference curve,then _____.
A)the consumer is in equilibrium
B)the consumer should purchase more of good X
C)the consumer should purchase more of good Y
D)the consumer cannot afford the combination represented by the tangency point
E)the consumer should purchase less of both goods

Question

Quizplus · Accepted Answer

When the budget line is just tangent to the highest achievable indifference curve, it means that the consumer has achieved the highest level of satisfaction given the available budget. This is known as consumer equilibrium or optimal consumption bundle. Therefore, the correct choice is (A) the consumer is in equilibrium.

When the Budget Line Is Just Tangent to the Highest