At the point where the indifference curve is tangent to the budget line

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    The marginal rate of substitution is less than the ratio of the two goods prices, and the consumer can only choose a market basket where the two are equal..
     The marginal rate of substitution is less than the ratio of the two goods prices, and consumer satisfaction can be increased by choosing a market basket on a higher indifference curve..
     The marginal rate of substitution is equal to the ratio of the two goods prices, and consumer satisfaction is maximized..
     Both 2 and 3.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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The marginal rate of substitution is equal to the ratio of the two goods prices, and consumer satisfaction is maximized..
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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