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coolsaurabh Group Title

For a consumer to be equilibrium why must marginal rate of substitution be equal to the ratio of prices of two goods?

  • one year ago
  • one year ago

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  1. ANGELNAV Group Title
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    bcoz v need tangency of budget line to the IC for maximising utility, n for that, slopes of both must b equal i.e. MRS(slope of IC)=P1/P2(slope of budget line)

    • one year ago
  2. surjeet Group Title
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    In order to maximize utility this condition must be satisfied... and as you know more is better for consumer..

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