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

The consumer is in equilibrium when the marginal rate of substitution (MRS) equals the marginal rate of transformation (MRT), the ratio of prices equals the ratio of marginal utilities, and the budget line is tangent to the indifference curve. All these conditions are equivalent and describe the point where the consumer maximizes utility given their budget constraint.

The Consumer Is in Equilibrium When