Question

For consumer’s equilibrium to be stable, the requirement is:
(a) Constant MRS
(b) Increasing MRS
(c)Diminishing MRS
(d)None of these​

Answer 1

Explanation:

Thus for equilibrium to be stable at any

point on an indifference curve, the

marginal rate of substitution between any two goods must be diminishing and be equal to their price ratio i.e.

MRS' = Px/Py Therefore, the

indifference curve must be convex to the origin at the point of tangency with the budget line.