Question

At consumer’s equilibrium, the marginal rate of substitution (MRS) between two goods is ______.

Options

• Greater than the price ratio

• Less than the price ratio

• Equal to the price ratio

• Zero

Answer 1

At consumer’s equilibrium, the marginal rate of substitution (MRS) between two goods is equal to the price ratio.

Explanation:

The equilibrium occurs where the MRS between the goods equals the ratio of their prices.