At the unique point of consumer equilibrium, the:
A) distance between indifference curves is maximum.
B) distance between the budget line and the indifference curve is maximum.
C) marginal utility ratio of the two goods is equal.
D) marginal rate of substitution (MRS) equals the slope of the budget line.

Question

Quizplus · Accepted Answer

At the point of consumer equilibrium, the consumer is maximizing their utility given their budget constraint. This means that the last dollar spent on each good provides the same level of satisfaction (i.e. the MRS is equal). At this point, the slope of the budget line (representing the rate at which the consumer can trade one good for another) is also equal to the MRS. Therefore, the correct choice is D.

At the Unique Point of Consumer Equilibrium, The