At the point of consumer equilibrium,the slope of the budget line is equal to the:
A) market rate of indifference.
B) indifference curve.
C) marginal rate of substitution.
D) consumer preference.

Question

Quizplus · Accepted Answer

At the point of consumer equilibrium, the consumer is allocating their budget in such a way that the marginal utility per dollar spent on each good is equal. This means that the slope of the budget line (which shows the tradeoff between the two goods) is equal to the marginal rate of substitution (which measures the rate at which the consumer is willing to trade one good for another while still being indifferent). Therefore, the correct answer is C, the marginal rate of substitution.

At the Point of Consumer Equilibrium,the Slope of the Budget