Question

For a consumer to be in equlibrium position , marginal rate of substitution between the two goods must be equal to ratio of prices of the two goods. Do you agree with tje given satatement

Answer 1

Explanation:

Answer: MRS (marginal rate of substitution) must be equal to Px/Py. As at this point, the rate at which the consumer is willing to substitute goods x for goods y (slope of IC Curve) that coincides with the rate at which market permits the consumer to substitute good x for good y(Slope of Budget line)

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