Q107
The consumer is in equilibrium at a point where the budget line
A.
Is above an indifference curve
B.
Is below an indifference curve
C.
Is tangent to an indifference curve
AnswerD.
Cuts an indifference curve
Answer: Option C
Solution
Answer: Option C
Solution:
The consumer is in equilibrium at a point where the budget line is tangent to an indifference curve. It means that marginal substitution rate between X and Y (MRSXY) should be diminishing.