Albert is consuming at a point where his budget line is not as steep as indifference curve.To reach consumer equilibrium,Albert
A)consumes less of the good that is measured on the horizontal axis.
B)consumes none of the good that is measured on the horizontal axis.
C)must increase his income.
D)must shop at stores that have lower prices.
E)consumes more of the good that is measured on the horizontal axis.

Question

Quizplus · Accepted Answer

When the budget line is not as steep as the indifference curve, it means the marginal rate of substitution (MRS) of the good on the y-axis for the good on the x-axis is higher than the price ratio of these goods. To reach consumer equilibrium, where the MRS equals the price ratio (the slope of the budget line equals the slope of the indifference curve), Albert should consume more of the good on the horizontal axis, making the budget line's slope match the indifference curve's slope.

Albert Is Consuming at a Point Where His Budget Line