Final answer:
The statement is true; if the indifference curve is not tangent to the budget line, the consumer has not reached their optimum level of satisfaction. The highest utility is achieved at the point where the highest attainable indifference curve is tangent to the budget line, indicating the most preferred combination of goods within budget constraints.
Step-by-step explanation:
The statement is true: if an indifference curve is not tangent to the budget line, the consumer is not at their optimum. In consumer theory, the point of tangency between the highest attainable indifference curve and the budget line represents the optimum consumption point for the individual. This point indicates the highest utility that a consumer can achieve, given their budget constraints.
Indifference curves represent combinations of two goods that provide the consumer with equal satisfaction or utility. The budget line represents all possible combinations of two goods that a consumer can afford, given their income and the prices of the goods. When an indifference curve crosses the budget line at two separate points, it implies that there is room for the consumer to move to a higher indifference curve and increase their utility without spending more money. The consumer reaches their highest level of satisfaction when they are on the highest indifference curve that just touches the budget line at a single point of tangency—any point on higher curves would not be affordable, and any point on lower curves would provide less satisfaction.
Therefore, when the indifference curve is not tangent to the budget line, the consumer can potentially increase their utility by reallocating their consumption of the two goods to reach the point of tangency.