In the indifference curve/budget line framework,at the consumer equilibrium,the consumer
A) is on the budget line.
B) is on the highest attainable indifference curve.
C) has a marginal rate of substitution equal to the relative price of the goods.
D) Only answers A and B are correct.
E) Answers A, B, and C are correct.

Question

Quizplus · Accepted Answer

At the consumer equilibrium, the consumer is on the highest attainable indifference curve (B) and on the budget line (A). The marginal rate of substitution (MRS) between the two goods is equal to the relative price of the goods (C), which means that the consumer is allocating their budget efficiently between the two goods. Therefore, all three answers (A, B, and C) are correct.

In the Indifference Curve/budget Line Framework,at the Consumer Equilibrium,the Consumer