The equilibrium condition for the consumer is that:
A)along a budget line, the indifference curve be tangent to the budget line.
B)expenditure on each good be equal.
C)the marginal utility of each good be equal to its price.
D)marginal utilities be equal for all goods.
E)none of the above.

Question

Quizplus · Accepted Answer

The equilibrium condition for the consumer is that the indifference curve be tangent to the budget line. This means that the consumer is maximizing their utility given their budget constraint, and any other combination of goods would either result in lower utility or be unaffordable. Expenditure on each good does not need to be equal, and the marginal utility of each good does not necessarily need to be equal to its price. Likewise, marginal utilities do not need to be equal for all goods, although they may become equal at the point of equilibrium.

The Equilibrium Condition for the Consumer Is That