The slope of the budget constraint,when a consumer has reached optimal consumption of two goods,is equal to the
A)Marginal rate of substitution.
B)Cross-price elasticity of the two goods.
C)Total utility for the two goods.

Question

Quizplus · Accepted Answer

The slope of the budget constraint represents the rate at which the consumer can trade one good for another while staying within their budget constraint. At the optimal consumption point, the consumer has maximized their utility given their budget constraint. Therefore, the slope of the budget constraint at this point must be equal to the marginal rate of substitution, which represents the rate at which the consumer is willing to trade one good for another while maintaining the same level of utility. Cross-price elasticity and total utility are not directly related to the slope of the budget constraint at the optimal consumption point.

The Slope of the Budget Constraint,when a Consumer Has Reached