When your budget line is just tangent to your indifference curve, you are at your best affordable point.

Question

Quizplus · Accepted Answer

This is true because the point where the budget line is tangent to the indifference curve represents the point where the consumer is making the most of their limited budget and is getting the maximum satisfaction possible. Any point to the left of the tangent point (lower budget line) would result in lower satisfaction than the tangent point, and any point to the right of the tangent point (higher budget line) would be unaffordable.

When Your Budget Line Is Just Tangent to Your Indifference