If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve:
A) consumer equilibrium has not been achieved.
B) all available income has been spent and total utility is maximized.
C) total utility can be increased by consuming less of both goods.
D) total utility can be decreased by consuming more of both goods.

Question

Quizplus · Accepted Answer

At the point of tangency between the budget line and an indifference curve, the consumer has allocated their income in such a way that they cannot increase their utility by changing the combination of goods, indicating that all available income has been spent and total utility is maximized.

If the Combination of Two Goods Occurs at a Point