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Question
Which of these is a condition for consumer’s equilibrium by indifference curve analysis?
Options
MUX = PX
`(MU_X)/P_X = (MU_Y)/P_Y`
`MRS_X = P_X/P_Y`
MUX = MUY
MCQ
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Solution
`MRS_X = P_X/P_Y`
Explanation:
Indifference curve equilibrium requires MRS to equal the price ratio, with diminishing MRS for stability. The other conditions belong to, or do not correctly state, cardinal utility equilibrium.
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