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coolsaurabh

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

  • 11 months ago
  • 11 months ago

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  1. ANGELNAV
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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)

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

    • 10 months ago
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