In a two-agent and two-good economy,a competitive market equilibrium occurs when

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In a two-agent and two-good economy, a competitive market equilibrium occurs when the agents' indifference curves are tangent to the price line. This happens when the ratio of the prices of the goods is equal to the ratio of the marginal rates of substitution of the agents. This ensures that neither agent can increase their utility by changing their consumption bundle in the market. Therefore, the equilibrium is efficient and stable.

In a Two-Agent and Two-Good Economy,a Competitive Market Equilibrium Occurs