If the MU\P ratio for two goods is the same, then
A)the slope of the budget constraint between the two goods is equal to the marginal rate of substitution (MRS)between the two goods.
B)the indifference curve between the two goods is concave to the origin.
C)the prices of the two goods are the same.
D)it follows that consumers prefer fewer goods to more goods.

Question

Quizplus · Accepted Answer

The MU/P ratio represents the amount of utility a consumer is receiving per unit of money spent on the good. If the MU/P ratio is the same for two goods, then the consumer is equally satisfied with each additional dollar spent on either good. This means that the consumer is indifferent between the two goods at the current prices, and the slope of the budget constraint between the two goods is equal to the MRS.

If the MU\P Ratio for Two Goods Is the Same