Question

Assertion (A): Consumer’s equilibrium is attained when budget line is tangent to a particular indifference curve.

Reason (R): This is the highest indifference curve which gives him the maximum utility.

Options

• Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation for Assertion (A).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation for Assertion (A).

• Assertion (A) is true and Reason (R) is false.

• Both Assertion (A) and Reason (R) are false.

Answer 1

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation for Assertion (A).

Explanation:

At the point of tangency, the slope of the budget line exactly matches the slope of the indifference curve. This point represents the highest possible level of satisfaction a consumer can physically afford to reach, making it the unique point of maximum utility and stable equilibrium.