1.

A consumer consumes only two goods, For a consumer to be in equilibrium, why must MRS be equal to the ratio of prices of two goods

Answer»

Solution :MRS MUST be EQUAL to Px/Py.
Because at this point the rate at which the consumer is willing to substitute GOOD x for good y(SLOPE of IC Curve) coincides with the rate at which market allows the consumer to substitute good x for good y(Slope of BUDGET line)


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