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Describe the scenario where a person's budget constraint is tangent to their indifference curve. Explain what...

Describe the scenario where a person's budget constraint is tangent to their indifference curve. Explain what is happening at this point of tangency.

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Answer #1

Indifference curve usually represent the set of all similar preferences of the consumer at which he is indifferent. A budget constraints actually refers to all the combination of all the possibilities a person can have at a particular income levels. When the preferences and the budget constraint meet, that point is both affordable and in the preference range of the consumer. At that point budget conatraint is tangent to the indifference curve. At the point of tangency is the customer consumption level..

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