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Find a wrong statement from the following explanations why an MRS between two goods must equal the ratio of the price of the goods
Find a wrong statement from the following explanations why an MRS between two goods must equal the ratio of the price of the goods for the consumer to achieve maximum satisfaction. 1. The MRS describes the rate at which the consumer is willing to trade off one good for another to maintain the same level of satisfaction. This determines the shape of indifference curve. 2. The ratio of prices describes the trade-off that the consumer is able to make between the same two goods in the market. 3. The tangency of the indifference curve with the budget line represents the point at which the trade-offs are equal and consumer satisfaction is maximized. 4. If the MRS between two goods is not equal to the ratio of prices, then the consumer could trade one good for another at market prices to obtain higher levels of satisfaction. 5. If the MRS between two goods is not equal to the ratio of prices, the trading one good for another continues until the highest level of satisfaction is achieved. As trades are made, the price will change and eventually become equal to the MRS.
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