The consumer is in equilibrium when A)MRT = MRS. B)P_x/P_y = MU_x/MU_y. C)the budget line is tangent to the indifference curve at the bundle chosen. D)All of the above.

Question

Quizplus · Accepted Answer

All three options listed represent necessary conditions for consumer equilibrium. A consumer is in equilibrium when they have optimized their utility given their budget constraints. This occurs when the slope of the budget line (MRT) equals the slope of the indifference curve (MRS), which is shown in A. Additionally, consumer equilibrium is achieved when the marginal utility per dollar spent on each good is equal, as demonstrated in option B. The budget line is tangent to the indifference curve at the chosen bundle because the consumer is optimizing their utility subject to their budget constraint, which is stated in option C. Therefore, all of the above options are necessary for consumer equilibrium.

The Consumer Is in Equilibrium When