When the Indifference Curve Is Tangent to the Budget Constraint

question 158

Multiple Choice

When the indifference curve is tangent to the budget constraint,

• A)a consumer cannot be made better off without an increase in her income or a price decrease in one of the goods she consumes.
• 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.

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Definitions:

Price Elasticity

A gauge of the responsiveness of the quantity of a good supplied or sought after to fluctuations in its price.

Equilibrium Point

A state in a market where the supply of goods matches demand, resulting in stable prices and quantities.

Total Revenues

The overall income received by a business from its operational activities, usually from sales of goods or services.