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

Question

Quizplus · Accepted Answer

When the combination of two goods is a point of tangency between the budget line and an indifference curve, it represents the optimal choice for the consumer. This means that the consumer has spent all their available income in the best possible way to maximize their utility given their budget constraint. Therefore, the correct choice is B - all available income has been spent.

If the Combination of Two Goods Is a Point of Tangency