A consumer satisfies the condition ________ when her indifference curve is just tangent to her budget constraint. A) MU_x = MU_y B) TU_x = TU_y C) MU_x/P_x = MU_y/P_y D) TU_x/P_x = TU_y/P_y

Question

Quizplus · Accepted Answer

The condition where a consumer's indifference curve is just tangent to her budget constraint is met when the marginal utility per dollar spent on good x equals the marginal utility per dollar spent on good y. This is represented by the equation in choice C, where MUS represents marginal utility and PS represents price, for goods x and y respectively.

A Consumer Satisfies the Condition ________ When Her Indifference Curve