In an indifference curve/budget line diagram,at the consumer equilibrium the slope of the budget line
A) equals the slope of the indifference curve.
B) is greater than the slope of the indifference curve.
C) is less than the slope of the indifference curve.
D) may be greater than, equal to, or less than the slope of the indifference curve.
E) has nothing to do with the equilibrium.

Question

Quizplus · Accepted Answer

At the consumer equilibrium point, the consumer is deriving the highest possible satisfaction from the given budget constraint. Therefore, the slope of the budget line (which represents the rate at which the consumer can trade one good for another) must be equal to the slope of the indifference curve (which represents the rate at which the consumer is willing to trade one good for another in order to maintain the same level of satisfaction). This is because if the slopes were not equal, the consumer could reallocate their consumption towards a bundle that would give them higher satisfaction. Thus, the consumer equilibrium occurs where the budget line is tangent to the indifference curve.

In an Indifference Curve/budget Line Diagram,at the Consumer Equilibrium the Slope