Multiple choice

When the consumer is in equilibrium, his price line is ______ to indifference curve.

  1. perpendicular

  2. tangent

  3. parallel

  4. diagonally opposite
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Consumer equilibrium occurs where the budget line (also called price line) is tangent to the highest attainable indifference curve. At this tangency point, the slope of the indifference curve (marginal rate of substitution) equals the slope of the budget line (price ratio), meaning the consumer maximizes satisfaction given the budget constraint.

Keep practicing — related questions