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21 March, 09:21

An optimizing consumer will select the consumption bundle in which the:

a. ratio of total utilities is equal to the relative price ratio.

b. ratio of income to price equals the marginal rate of substitution.

c. marginal rate of substitution is equal to the relative price ratio of the goods.

d. marginal rate of substitution is equal to marginal utility

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  1. 21 March, 09:40
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    c. marginal rate of substitution is equal to the relative price ratio of the goods.

    Explanation:

    we know that the costomer MRS = Px/Py, where x and y are the two goods.

    MRS (x, y) = MUx/MUy = Px/Py

    Therefore, The marginal rate of substitution is equal to the relative price ratio of the goods.
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