does tangency of indifference curve with the budget line always result in optimal solution for the consumer utility maximisation problem? discuss in 250-300 words.

Hello, Arsh!

A budget line shows combinations of two goods a consumer is able to consume, given a budget constraint . An indifference curve shows combinations of two goods that yield equal satisfaction. To maximize utility, a consumer chooses a combination of two goods at which an indifference curve is tangent to the budget line .

Every item has a price tag. Consumers must choose among alternative goods with their limited money incomes. The Utility Maximization rule states: consumers decide to allocate their money incomes so that the last dollar spent on each product purchased yields the same amount of extra marginal utility .

The indifference curves must slope down from left to right. This means that an indifference curve is negatively sloped. It slopes downward because as the consumer increases the consumption of X commodity, he has to give up certain units of Y commodity in order to maintain the same level of satisfaction.

There are four important properties of indifference curves that describe most of them: (1) Indifference curves are downward sloping, (2) higher indifference curves are preferred to lower ones, (3) indifference curves cannot intersect, and (4) indifference curves are convex (i.e. bowed inward).

Hope this helps!