Saved Bookmarks
| 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) |
|