All point of tangency between an indifference curve and budget line are truly points of maximum utility

Answer 1

This statement is not necessarily true. Indifference curves represent different levels of utility for a consumer, with higher curves indicating higher levels of utility. The budget line represents the combinations of goods or services that a consumer can afford given their budget constraint.

When an indifference curve and a budget line intersect at a point of tangency, it represents a situation where the consumer is maximizing their utility given their budget constraint. However, it does not necessarily mean that the point of tangency represents the absolute maximum utility for the consumer.

There may be other points on the same indifference curve that are not on the budget line, which could provide even higher levels of utility. These points are not feasible given the consumer's budget constraint, but they still represent higher levels of utility compared to the point of tangency.

In summary, while the point of tangency between an indifference curve and a budget line represents an optimal allocation of resources, it does not guarantee the maximum utility for the consumer.