Using Figure 4, explain why the point of tangency of the budget line with an indifference curve

Question:

Using Figure 4, explain why the point of tangency of the budget line with an indifference curve is the consumer’s equilibrium position. Explain why any point where the budget line intersects an indifference curve is not equilibrium. Explain: “The consumer is in equilibrium where MRS = PB/PA.”

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Economics

ISBN: 978-0073375694

18th edition

Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

Question Posted: