A consumer satisfies the condition MU_x/P_x = MU_y/P_y when his indifference curve ________ his budget constraint. A) is completely above B) is completely below C) is just tangent to D) crosses

Question

Quizplus · Accepted Answer

The condition given represents the equality of the marginal utility of spending on goods x and y relative to their prices, which occurs at the point where the consumer's indifference curve is just tangent to the budget constraint. This tangency point represents the optimal consumption bundle where the consumer maximizes utility given the budget constraint.

A Consumer Satisfies the Condition MUx/Px = MUy/Py When His

A Consumer Satisfies the Condition MU_x/P_x = MU_y/P_y When His