The point where the indifference curve is tangent to the budget line A. is a point...
The point where the indifference curve is tangent to the budget line
A. is a point on consumer's demand curve.
B. is the best affordable point.
C. is where the marginal rate of substitution exceeds the relative price by as much as possible.
D. All of the above answers are correct.
Homework Answers
The pont where the indeifference curve is tangent to the budget line,is the best affordable point.
The tangent point is where the utility is maximum. It is point which shows best affordable combination of goods given the buget constraint.
The tangency point is the utility maximisation point where marginal rate of substitution is equal to the price ratio of two goods. All points on buget line shows different conbination of two goods given the budget constraint. All point on indifference curve shows two different gooda that give equal satisfaction and utility.. Tangent point is where the budget line is convex to indifference curve. It shows the best affordable combination of two goods in given budget which maximises the utility of the consumer.
Hence,the answer is B) is the best affordable point
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